This article is from the Australian Property Journal archive
SCRAPPING the childcare subsidy Activity Test could boost women’s workforce participation by almost 40,000 and up the GDP by up to $4.5 billion each year.
According to a new report by Impact Economics and Policy, abolishing the Activity Test for access to subsidised early childhood education and care could have a significant impacted on the employment level of mothers with children under five and the country’s economy more broadly.
“The child care subsidy activity test was envisaged as providing an incentive for parents, particularly women, to return to work or increase their workforce participation but it is not working that way,” said Angela Jackson, lead economist at Impact Economics and Policy.
The report revealed that the 2011 reforms to Paid Maternity Leave increased employment amongst these women by 74,245, adding $8.5 billion to GDP in 2021-22.
“We can see from the huge increase in participation of mothers with children under 5 following the introduction of Paid Maternity Leave the power of policies that make returning to work easier,” added Jackson.
“Removing the Activity Test reduces the costs of looking for work, takes away complexity and red tape for women with young children looking to return to work.”
With the current Activity Test in place, access to subsidised early childhood education and care is linked to both parents’ workforce participation.
This is contributing to 126,000 Australian children from low-income households unable to access early childhood education and care.
“This increases choice for women and families, bolsters family income at a time of rising cost of living and interest rate rises, and unlocks new workers at a time of a national labour shortage,” said Jackson.
“If we look overseas to countries that don’t have this activity test, places like Sweden and Quebec, they have much higher rates of female participation and hours worked than Australia.
The majority of participation increases would be for women in households with incomes below $72,000, with participation amongst this group estimated to increase by 20,790.
Additionally, more than 50% of these increases to participation would be amongst single mothers.
Following the findings of the report, SNAICC – the national peak body in Australian representing the interests of Aboriginal and Torres Strait Islander children and families – is calling for the test to be abolished or replaced with a fairer system.
“SNAICC has demonstrated for many years how the activity test model presents an extra barrier to Aboriginal and Torres Strait Islander families already facing challenges accessing early childhood education and care,” said Catherine Liddle, CEO at SNAICC.
“It’s not just the financial costs that present barriers for our families. There is the administrative complexity of the system. Many of our families end up in debt because of this, and this in turn impacts Aboriginal community-controlled early years services who often have to absorb these debts.”
The government increased the hours of subsidised care children have access to in the October Budget, boosting funding for the sector with including $4.6 billion allocated to increasing the maximum childcare subsidy, increasing the number of families who can access the scheme.
This latest report comes after the Productivity Commission revealed quality standards of childcare centres have fallen in Australia, as spending on early childhood education falls in many states and territories.
“At a time when Australians are looking for assistance with cost of living, a change to the activity test can deliver non-inflationary relief while growing the economy by multiple billions. Few reforms can boast a similar return on investment,” concluded Jackson.
