The Federal Government has announced that there will be changes to the way childcare payments are determined in the 2015 budget.
Social Services Minister Scott Morrison said the changes will more strongly tie childcare payments to workforce participation.
“What has been guiding us on childcare has been the objective of workforce participation. It’s not a welfare payment. It’s not an income support payment or anything like that. It is there to encourage people to be in work, stay in work, so families can have choices,” he said.
This has raised concerns that a new activity test will result in 1.1 million families losing subsidies, which could lead to some of the 1.6 million children using approved childcare places dropping out of the system.
Opposition spokeswoman for families, Jenny Macklin, said the change could mean families won’t be able to afford childcare.
“One of the big concerns we have with what we know about the Government’s plans so far is that the Government may end up locking out around 100,000 families from child care,” she said.
ABC Fact Check takes a look at the proposal.
What the Government has foreshadowed
Although the full detail of the changes have not yet been released, Mr Morrison has flagged the activity test as one area of reform.
At a press conference on May 1, Mr Morrison said he wanted to increase activity requirements for families before they receive childcare subsidies.
He said the tests would consider “whether they are in paid work, whether they are looking for paid work, whether they are in study or in some formal voluntary capacity” during the course of a week.
“But at the same time we understand the need for a safety net for families on low incomes as currently exists to be able to access a regular period of early childhood learning and we will certainly ensure that continues,” Mr Morrison said.
In February Prime Minister Tony Abbott scrapped his controversial paid parental leave scheme and said the focus needed to be on childcare if Australians wanted higher participation and a stronger economy.
“Women, after all, are our country’s most under-utilised source of skills and entrepreneurship,” Mr Abbott said.
“If female participation in Australia were 6 per cent higher, at Canada’s level, GDP would be higher by $25 billion a year. So a better childcare policy is good economic policy as well as fairer family policy.”
Little incentive for women to work
The Productivity Commission says the way the tax system works in Australia provides little incentive for many women to return to work.
This is because a mother’s income is often added to her partner’s, pushing the family’s income into a higher bracket for the family tax benefit.
This view is reinforced in a submission to the Productivity Commission from the Grattan Institute, a public policy research institute.
It said the current policy settings “make returning to work so financially unattractive for many women that they remain out of the workforce for long periods”.