Business groups call for changes to childcare subsidies and paid parental leave in the Federal Budget 2021

Business groups have called on the Morrison government to shake up paid parental leave policies in the upcoming federal budget and have also called for increases in childcare subsidies, saying removing these barriers to women in the workforce could boost the economy by more than $5 billion per year.

This call comes as the new Minister for Women’s Economic Security Jane Hume hints that next month’s budget could make “significant inroads” in addressing gender inequality.

The proposed changes, backed by groups including Business Council Australia (BCA) and Chief Executive Women, would increase the childcare subsidy from 85% to 95% for lower income households.

The subsidy would then be tapered; for families earning $80,000 or more, it would decrease at a rate of one percentage point per $4,000 in additional income.

The proposal would also allow families to divide 20 weeks of paid leave from the government between each parent, as they choose. One parent would be able to take up to 18 weeks, with the other taking two weeks or more.

Parents who share the leave more evenly would be ‘rewarded’ with an additional week or two of paid leave.

Some 90,000 people across Australia said they did not participate in the workforce last year because of the high cost of childcare, BCA chief executive Jennifer Westacott said in a statement.

A so-called ‘women’s budget’ would not only be about addressing some of the cultural imbalances in the Australian society.

“It’s also an economic imperative,” she added.

Current childcare and parental leave policies are a barrier to women in the workforce in particular, and do not work for modern families, Westacott continued.

BCA’s proposed changes would “smooth the sharp financial cliffs in the system” that discourage people from getting back to work or picking up additional hours.

Westacott cited a report from KPMG released back in September, which suggested that bringing in the suggested tapered system and scrapping per-child caps could add some $5.4 billion to the economy each year, at a cost of $2.5 billion.

KPMG also suggested that universally raising the childcare subsidy from 85% to 95% would cost about $5.4 billion, annually, but would boost the economy by $7.4 billion.

As parents increase career-long productivity, this benefit could accumulate. KPMG estimated that over 20 years it could add up to $10 billion to Australia’s GDP.

Westacott also estimated that the total cost of transforming the paid parental leave system would cost about $1 billion. She compared that to the $150 billion spent on initiatives like JobKeeper, designed to keep the economy afloat during the COVID-19 crisis.

“For less than 1% of that we can drive the country forward,” she said.

The call for an overhaul to childcare policies follows a 2020 budget that was widely criticised for leaving women behind.

Over the weekend, Hume hinted that this year’s offering will be more inclusive of women, and may well include cash for childcare subsidies.

Getting more women into the workforce is a key to women’s economic security, she told the AFR Weekend, highlighting childcare as one of the barriers holding them back.

“Making sure our childcare subsidy system is appropriately calibrated is something we’re looking at,” Hume said.

“We know childcare can become unwieldy for people who have potentially more than one child, and that’s something, I think, we’re turning our minds to.”

However, she also hinted that more complex reforms may not form part of this year’s budget, saying you “can’t undo every inequality” at once.

“But we can make significant inroads,” she said.