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Modelling the effects of childcare policy changes: technical supplement to the draft report

Children Learning and teaching Early childhood education Child care Australia
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The Childcare and Early Childhood Learning inquiry terms of reference require the Commission to assess the contribution that access to affordable, quality childcare can make to child development and increased participation in the workforce. The Commission has been requested to consider new policy options within the current government funding parameters.

In addressing its task, the Commission has developed a model to gauge the potential impacts of policy scenarios proposed in the draft report (referred to as the Productivity Commission Microsimulation Childcare (PCMC) model). This technical supplement presents the interim version of this model and preliminary results used for the draft inquiry report. It also outlines some caveats and limitations to bear in mind when interpreting the results.

The main results show that the proposed simplification of the existing childcare arrangements could increase demand for childcare and labour supply from parents. Further, the changes are likely to benefit low- and middle-income households and increase workforce participation in these groups.

This paper is divided into 5 sections:

1. The first provides a broad overview of the Commission’s approach to the modelling task and the framework adopted.
2. The second highlights the assumptions, caveats and limitations that are important when considering the results and implications of the Commission’s preliminary modelling.
3. The third details the policy changes being examined.
4. The fourth explains the illustrative, initial results, as well as the intuition behind them.
5. The fifth section concludes by identifying areas of planned further development.

The paper also includes appendixes — on model data sources and preparation; a detailed model specification; detailing listing of the parameters used in the modelling; and results for all four policy options described in the draft inquiry report.

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