How fixing the ‘broken’ childcare system would lift the economy by $5bn

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April 27 2021
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Big businesses want the treasurer to use next month's budget to fix the broken childcare system and paid parental leave system, an industry expert has revealed.

fixing the broken childcare system would lift the economy

The Business Council of Australia said that the COVID-19-induced border closures has left population growth at its slowest rate since World War I with it now being critical to lift female participation and homegrown talent.

“A women’s budget is not just about fixing the cultural problems we’ve seen writ large across society, it’s also an economic imperative,” Business Council of Australia CEO Jennifer Westacott said.

She said the Productivity Commission found that more than 90,000 people across Australia were not in the workforce last year, mainly because of the high cost of childcare.

“Our childcare and paid parental leave systems are a barrier to women who want to get back into work and they don’t work for modern families,” Ms Westacott said.

“These changes aren’t just about giving women a chance to get back to work. This proposal means people can work to their full potential and advance in their chosen fields without being punished by high childcare costs when they get even a modest pay rise,” Ms Westacott said.

“For every dollar we invest in childcare, we’ll get $2 back. KPMG estimates that the cost of our childcare plan would be around $2.5 billion, but it would deliver a boost to the economy of around $4 billion to $5 billion.”

The council estimates the cost of transforming the paid parental leave would cost the government around $1 billion a year.

“To put this in context, over the last 12 months we’ve spent $150 billion on nation saving measures like JobKeeper to keep the economy afloat, for less than one percent of that we can drive the country forward,” the CEO said.

“By tackling these issues, we can get people back into the workforce, give families choices and build on our momentum down the path to recovery.”

Fix the broken childcare subsidy system

The childcare subsidy would grow from 85 per cent to 95 per cent for lower-income households.

Starting for families earning $80,000, the subsidy would taper off at one percentage point for every $4,000 in additional family income.
For example, a family earning $80,000 will receive a 95 per cent subsidy, a family earning $84,000 will receive a 94 per cent subsidy.

Make paid parental leave work for modern families

Parents currently get 20 weeks of paid leave from the government divided between the primary carer, almost always mum, who gets 18 weeks and a secondary carer who gets two weeks.

“Families should be able to make the decisions about who takes time off to care for kids without filling out hours of paperwork,” Ms Westacott said.

“Under our scheme, families would get to choose how they divide their leave based on what works best for them.”

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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