Treasury announces childcare boost ahead of budget

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May 03 2021
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The Morrison government has unveiled another key piece of budget legislation, with the opposition labelling it a ‘missed opportunity’ for working mothers.

Treasury announces childcare boost ahead of budget

The Treasurer has announced a $1.7 billion investment into childcare services in a move set to benefit over 400,000 Aussie families.

According to a joint statement by the Minister for Women Marise Payne, the Minister for Youth and Education Alan Tudge and the Minister for Superannuation Jane Hume, the government will target low and middle-income families trying to get them to work an additional day.

“The investment will add up to 300,000 hours of work per week, which would allow the equivalent of around 40,000 individuals to work an extra day per week and boost the level of GDP by up to $1.5 billion per year,” the statement said.

Treasurer Josh Frydenberg wrote in an opinion piece that the gender pay gap is falling, but admitted that additional work needed to be done.

“The government’s focus remains on supporting low and middle-income families, with the tapering rate applying between incomes of $69,390 and $353,680. This targeted and proportionate investment is designed to give parents who choose to work more hours or more days the opportunity to do so,” he said.

As part of the 2021-2022 budget, the current $10,560 cap on the childcare subsidy will be removed.

Second, families with two or more children aged 5 and under will receive a 30 per cent increase in the subsidy for their second and subsequent children up to a maximum of 95 per cent of fees paid.

Mr Frydenberg said the investment builds on the $10.3 billion the government is already investing in childcare this year.

“These changes strengthen our economy and at the same time provide greater choice to parents who want to work an extra day or two a week.”

“This is a targeted and proportionate investment that simultaneously makes childcare more affordable, increases workforce participation, and boosts the Australian economy by up to $1.5 billion per year.”

Treasury said the changes will come into effect from 1 July 2022.

‘Disappointing, missed opportunity’

The Opposition pointed out that the Morrison government’s announcement is a cheaper version of a policy they announced late last year.

That policy would similarly scrap the childcare subsidy cap, but would go further in boosting subsidy rates, offering subsidies for families earning up to $530,000.

The government’s childcare proposal will only lift the childcare subsidy rate for families who have a second or subsequent child under five years old in the system.

“Disappointingly, the Treasurer has yet again missed an opportunity to fundamentally and permanently reform childcare, provide a significant boost to women’s workforce participation, and a boost to the economy,” Opposition Leader Anthony Albanese said.

Mr Albanese said that as the government will only increase subsidies for a second or subsequent child in the system, the announcement will make an already complicated system more complicated, and will cause confusion for families as to whether this reform will leave them any better off.

He pointed out that in comparison, Labor’s Cheaper Child Care Plan lifts the subsidy and smooths the taper rate across the board, regardless of how many children the family has or how old they are – leaving 97 per cent of families – or more than 1 million families – better off. By assisting 1 million families instead of 250,000, Labor’s childcare plan would provide a bigger boost to the economy.

“In addition, the many Australian families struggling under the cost of out-of-school hours and vacation care will not benefit at all from the Morrison government’s lift in subsidy,” Mr Albanese said.

“Families desperately need immediate relief from soaring childcare costs, yet these changes are not even set to come in for over a year.”

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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