Childcare should be made cheaper to enable more women to do more paid work, and to help lift the economy out of the COVID recession.

The federal government should spend an extra $5 billion a year on childcare subsidies. The payoff would be an $11 billion-a-year increase in GDP from the boost to workforce participation – and $150,000 in higher lifetime earnings for the typical Australian mother.

The childcare subsidy for low-income families should be raised from 85 per cent to 95 per cent, gradually tapering for households with income above $68,000. Under this scheme, 60 per cent of families would pay less than $20 per day per child for childcare, and no family would be worse off.

A range of policy, cultural, and social factors conspire to prevent many Australian women from working the paid hours they would prefer. A combination of tax, welfare settings, and childcare costs means some second-earners take home little or no extra pay for additional hours of work. This ‘workforce disincentive rate’ can be particularly punishing for the fourth and fifth day of work for the primary carer, still generally a woman.

Key recommendations:

  • Reduce the barriers to paid work
  • Improve childcare availability and quality
  • Enable shared caring
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Grattan Institute Report No. 2020-11