Kelly O'Dwyer (Higgins, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Hansard source

I welcome the debate that we are having here at the dispatch box today about the importance of child care in our national economy and the importance of child care for families right across this country. I congratulate the shadow minister for bringing forward this motion, and I also congratulate my colleague the Minister for Social Services for the very inclusive way he has gone about tackling one of the great challenges that we face as a nation: the challenge to make sure that for the $7 billion that the government spends on supporting families we get the very best outcomes for those families. We want to focus on getting accessible and affordable child care, we want parents to be happy with the quality of that child care, and we want it to be the child care they need to ensure that they can participate in working life if that is their choice.

We know that the best form of welfare is a job, and the minister delivered an excellent speech to the Press Club only the other day that spoke about these elements. We know, however, that the participation rates for some people—particularly for women aged between 25 and 44—is much lower than in comparable countries in the OECD. We lag behind Canada, New Zealand, the UK and the United States. One of the critical questions we have to ask ourselves is: why is this? Why does Australia lag behind these other countries? Why is our labour force participation for women so much lower? I think the first and most obvious answer is that we have not yet been able to crack the issue of affordable and accessible child care.

Beyond that, the Productivity Commission, which has done such excellent work in the final delivery of their report, has highlighted another aspect which I think is a huge impediment particularly for women getting back into the workforce; that is, the interaction between our tax and transfer system and how women, in particular, are making the choice as to whether or not it is worth it to go back to work. The Productivity Commission highlighted in its interim report that in 2012-13 over 70 per cent of families who used approved early childhood education and care services also received another government payment. This payment was, on average, one of four types of payment, and the commission looked at the interaction between the way these payments work, the childcare situation and why it is that families sometimes make the choice not to return to work. They looked at the effective marginal tax rates of people in different scenarios. I am going to outline one particular scenario that I think illustrates this point, and that is the scenario of a single mother, Nicola, and her two-and-three-year-old children. Nicola earns $31.54 per hour and sends her children to long day care at a cost of $88 per day per child. When she thinks about providing for her family, she has to think about how working will affect her eligibility for the parenting payment, the family tax benefit part A, the childcare benefit and the childcare rebate. Of course, she has to think about the income tax system as well.

Scarily, the commission's analysis shows that she faces an effective marginal tax rate of 38.6 per cent in working a solitary day. The effective marginal tax rate if she works a second day rises to 66.5 per cent and to 76.3 per cent on the third day. The killer, though, is that on the fourth day that rises to 111.5 per cent on that day. At this point, Nicola is financially better off to stay at home rather than to work.

Clearly, these are complex issues; clearly, the interaction forms part of a disincentive for people to get back into the workforce; and, clearly, this is an issue the Productivity Commission has highlighted and an issue that the government needs to address. I welcome the spirit of cooperation that we have heard in the chamber here today from those opposite, and I look forward to working with them to be able to deliver the very best outcome for Australian families.

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