Final Submission to Productivity Commission Review of Childcare and Early Childhood

The National Foundation for Australian Women (NFAW), having given evidence to a hearing of the Commission, undertook to bring some further information to the Commission. We will not comment on every issue raised in the Interim Report. Our specific submissions are set out below.

1. GENERAL COMMENTS

If parental workforce participation is a major goal of Government policies, then child care is but one of an inter-related suite of policies which must be coordinated. Reformation of child care alone will not produce solutions.

One critically significant issue is that of Effective Marginal Tax Rates (EMTR). This is an issue which was also discussed in the Henry Review of Australia’s Future Taxation System. The Commission’s modelling demonstrates that the interaction of child care net fees, the loss of Family Tax benefits, and higher rates of income tax, all combine to make workforce participation for many female parents (against whose net income most families make participation decisions) a loss making proposition. Decisions to work part-time are affected by EMTRs. Notably the Commission’s modelling supports anecdotal evidence that many mothers reduce their hours of work once the EMTR becomes excessive, and in high cost centres this is linked to the annual cap on the CCR.

Governments wishing to increase mothers’ participation rates need to give thought to this issue.

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