Christian Porter (Pearce, Liberal Party, Parliamentary Secretary to the Prime Minister) Share this | Hansard source

For anyone interested in some of the economics of the actual drivers of increases in standards of living in modern Western economies, a very important report was released in 2011. That report, by the UK Institute for Fiscal Studies, was the first comprehensive study since the late 1960s of the factors that actually drive family income growth, as they apply to the UK. The lessons are very pertinent for Australia. It was interesting to listen to the Leader of the Opposition because, if this matter of public importance is about standards of living and how they might be improved and increased, particularly for low-middle income working families in Australia, that was a speech in the year of Labor ideas which was completely devoid of any new idea or any plan whatsoever for increasing the standard of living for low-middle income families. What we have before the House, in the form of the releases from the Minister for Social Services, the details of which will be provided in the budget, is a clear plan revolving around child care.

The report by the UK Institute for Fiscal Studies showed two things—first, that the drivers of increased standards of living differed somewhat across various income levels in the United Kingdom economy. Secondly, they focused on low-middle income households and looked at data over a 40-year period. What they found with respect to those low-income households was very simple and very clear: they found that the key factor in raising the living standards of low- to middle-income households over the last 40 years in the United Kingdom had been the entry of women into the workforce in large numbers. The factors that drove income growth since the late 1960s differed across income levels. In upper-income families, male wage growth had been the strong provider of substantial growth in the increase in the standard of living. But, significantly, that trend had not applied to low- to middle-income households since about 1980. Employment income for low- and middle-income households had increased, and that increase had been generated by female income earners returning to the workforce. In 1968 in the United Kingdom, 86 per cent of low- and middle-income household gross employment came from men and 14 per cent from women. By 2008-09, 63 per cent came from men and 37 per cent from women in low- and middle-income households.

Overall, incomes in the low- to middle-income households rose in real terms by about 143 pounds between 2002 and 2008. The substantial driver of that was increased female participation in the workforce. The Institute for Fiscal Studies report said that between 1968 and 2008-09 over a quarter of all the growth in household wealth—a quarter of the increases in standard of living for UK low- to middle-income households—came from women working, compared to only eight per cent of the increase in the standard of living coming from men in work. So, looking just at the increases in employment, it meant that 78 per cent of all the growth in low- and middle-income households' income, in their standard of living, came from women while income from men's work barely increased the standard of living for that cohort. So the trend, if you like, was reversed over that long period of time. Low-middle income families went from being more reliant than wealthier households on a sole male income earner to being much less reliant than wealthier households on a sole male income earner.

That report is very applicable to Australia and to other Western democracies, and it raises the same question for Australians as it does for the UK—and that is a question that this budget deals with in a very detailed way: where will the income growth for low-middle income families come from over the next decade to increase the standard of living for the men, the women and the children in those families? The coalition answer to that question is greater female workforce participation. The plan before the House in the budget to achieve that revolves around child care. The Labor answer seems to be this: business, with the range of handouts that exist, absolutely as usual—which presumes that everything that happens by way of transfer payments, whether it be FTBA or FTBB, is the perfect response for all economic circumstances to generate increases in standard of living. That just cannot be the case.

The second problem with the Labor plan, if I can be so generous as to call it that, is that it talks about assistance revolving around handouts that have no behavioural link whatsoever to increasing female participation in the workforce—none whatsoever. So what this government intends to do is to take some money that has previously been applied to a certain outcome—which was simply the transfer of the money—and use that money in a different way to engage, incentivise and make much easier increased female participation in the workforce.

As I said, in the UK the average household income almost doubled in real terms in the 40-year period considered by this report. In Australia the story is very similar: real household disposable income in 1994 was $540 a week; that had increased to $820 a week in 2014. So Australian households are $290 better off today in real terms than they were two decades ago. From looking at the best evidence and available research, it seems quite clear that that has been generated by women entering the workforce, particularly from low- to middle-income households.

What are the barriers in 2015 to further female participation in the workforce? Is it FTBB? Is it something else? Or is it the affordability and availability of child care? Is the barrier for women entering the workforce the notion that they may no longer be able to receive two payments for the one purpose, which is maternity leave? Or is the barrier the ongoing affordability of child care?

In Australia, the Productivity Commission found 165,000 respondents explicitly stated that they wanted to work more, but that there were disincentives in the present system for them to do so. Departmental qualitative research around the plan that will be in tonight's budget showed that 24 per cent of the families in the relevant cohort with children under 12 said that they would be encouraged to work more under this plan. That demonstrates that this side of the House has a plan to increase workforce participation for mothers and that historically that is the best driver of the standard of living for Australian low- and middle-income households. If we have a look at the plan: there is an extra $3.5 billion extra, and families who earn between $65,000 and $175,000 will be $30 a week better off. They will then receive an effective subsidy of 85 per cent of the cost of child care. Those above $170,000 will receive a subsidy of around the 50 per cent mark and they remain essentially at the same level that they were before this reform. So let's put to bed right now the nonsense that, somehow, this is skewed to the upper end of the household income market. It certainly is not; it is the low-to-middle income end where this is designed to create incentives and ease return to work. Below $65,000 there is a specific package tailored to children in situations of disadvantage, but the assistance in this plan is not like the assistance that we seek to make savings from. The assistance that we seek to make savings from is assistance which is not in any way connected to achieving any behavioural outcome that leads women back into the workplace, but makes the transition easier and allows the family income of those families to increase. This is a plan that actually targets public money in a way which, based on best evidence and available research, has the best chance to increase the living standards of low-to-middle income families in Australia.

Perhaps most telling in this circumstance is that the activity test is both modest and fair, but it incentivises work. All that you need to do is to provide yourself with the gateway to greater employment—starting off with eight hours a fortnight in paid work or in unpaid work in a family business, in education, in training or in some form of participation which may indeed be charitable. By providing that gateway to earn income for your family—which has been the driver of better standards of living for Australians—this plan is so far superior in its target to reach an outcome than that which the saving seeks to achieve. I will leave you with this thought: in Australia in 1983 the families where both parents worked were about 42 per cent of all families; in 2010 they were 61 per cent. Those families are better off financially. Even more importantly, perhaps, 32 per cent of single mothers were in work in 1983; today that figure is 57 per cent. They are much better off.

See this speech in context