EXPLAINER

Childcare is the new battleground for the Coalition and Labor. What are they each promising?

Childcare is set to become a major election issue: Picture: Karleen Minney
Childcare is set to become a major election issue: Picture: Karleen Minney

Treasurer Josh Frydenberg has announced the government will spend an extra $1.7 billion on childcare in next week's budget, as part of a bid to allow more parents to work more hours without getting stung by hefty fees.

The promise from the government comes after a tumultuous year in the sector, when childcare was made free for a period during the pandemic, and the opposition has made its separate promise on childcare a key plank of its bid to win the next election.

Navigating the maze of the childcare subsidy is already a difficult task, so telling the difference between the two government policies, and how they will affect different families is a challenge.

How does it work at the moment?

Under the current system, the government pays a childcare subsidy directly to childcare centres, at a rate determined by the income of the family. As the family income grows, the amount of subsidy tapers away, in a system designed to offer more support to low income earners.

What has the government promised?

Under the extra funding announced by the government on Sunday, the maximum subsidy for families with two or more children aged under five will increase from 85 per cent of the cost of care to 95 per cent.

Under the current system, families with a combined income of $189,390 have a childcare subsidy cap of $10,560 per child, which will be removed.

The government says this means families won't have to choose between working an extra day at work and having that income being eaten up by childcare fees.

There is a catch though - this isn't due to start until the 2022-23 financial year, meaning families will have to wait more than a year to see the difference.

What has Labor promised?

Labor leader Anthony Albanese announced his party's childcare policy in response to last year's budget in October, also promising to remove the $10,650 cap on the subsidy for all families and lifting the maximum subsidy to 90 per cent from 85 per cent.

Under the policy proposal the rate of childcare subsidy would increase for all families with incomes under $530,000. Labor says they would also commission a Productivity Commission review of childcare "with the aim of implementing a universal 90 per cent subsidy for all families".

Who would benefit?

The government says families with a combined income below $130,000 will make up half of those who benefit under their policy announcement, but high income earners are also set to get a boost.

A table released by the government to support the weekend's announcement shows a family earning $40,000 with current childcare costs of $124.60 a week would be $41.60 better off, while a family with income of $180,000 with current costs of $416 a week would be $124.80 better off under the new subsidy.

Labor says their policy would benefit 97 per cent of families, not just those with more than one child in care. While Labor's policy would deliver a higher rate of subsidy across the board, it has been criticised by the government as delivering too much of a benefit to high income earners who have more capacity to pay for care.

Why is this becoming a big political issue?

Most working parents will say the cost and availability of childcare is one of the biggest determining factors on whether or not both parents work, and how many hours they do, and the major political parties are listening.

As well as the hip pocket implications for families, government funding for childcare is increasingly being considered as a productivity issue. For working parents, the cost of childcare is a cost of working, and the high cost of childcare is often cited as a reason parents - most often mums - work less than they would like to.

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Mr Frydenberg placed the government's policy firmly in the economic realm, saying it would allow up to 300,000 extra hours of work a week, and allow the equivalent of 40,000 people to work an extra day a week. He said it would boost gross domestic product by $1.5 billion each year.

Why is childcare considered a 'women's issue' when men have children too?

While we have come a long way from the expectation that women will be home makers and men the sole bread-winners, the impact of gender roles and the gender pay gap means that when childcare becomes more expensive, women are more likely to be the ones to choose to work fewer days. As long as women are taking on the majority of caring responsibilities in the family, changes to childcare policies are expected to have a bigger impact on female workforce participation than that of men.

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This story What are the government and opposition promising on childcare? first appeared on The Canberra Times.

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