The Grattan Institute asserts the ALP's proposed change to childcare support is the most important economic news of the election campaign. The 2019 Grattan Institute Commonwealth Orange Book identified getting more women into the workforce as one of the most valuable things the next government could do. Female participation in the labour force is lower in Australia than in similar countries. It is particularly low for women working full-time. That’s because motherhood hurts female participation more in Australia than in other countries. Before having children, Australian women are just as likely to work as men. On having children, many drop out of work and some never go back. Those who do return often pay a career penalty, and the childcare barrier is a significant factor.
Women with children receive relatively little financial reward for entering the workforce, and even less for working more hours. Some find working more hours costs more than it pays. They face high effective marginal tax rates because as they work more hours they lose more family and childcare benefits as well as paying more income tax. Factoring in the cost of childcare itself, some face costs exceeding 100% of what they earn.
Here the Coalition deserves some credit. Its previous reforms to the childcare subsidy helped reduce effective marginal tax rates. But there’s still a long way to go, with many mothers still facing very high effective rates.