Barbara Pocock (SA, Australian Greens) Share this | Link to this | Hansard source

I present addition information received by the Select Committee on Work and Care and I move:

That the Senate take note of the document.

Through the Select Committee on Work and Care, I asked Treasury whether they have undertaken any analysis of the high effective marginal tax rates, which are driving women out of the workforce on days 4 and 5 of their working week. In the response that I've just tabled, Treasury indicate that effective marginal tax rates certainly reduce the financial incentive for someone to work or to increase their hours, particularly after factoring in their out-of-pocket childcare costs. Treasury acknowledges that in dual income households with children these disincentives may play a stronger role in affecting decisions about whether and how much to work for women, who tend to be the secondary income earners and who bear more caring responsibilities.

It is clear, based on the Treasury response, that the cost of child care drives up the effective marginal tax rate. The work and care inquiry received evidence of structural features in Australia's tax and transfer system that can discourage parents from working additional hours. The combination of progressive income tax rates, reduced family support payments at higher income levels and childcare costs can result in very high rates of effective marginal tax for working parents. This outcome is particularly punishing for working women, who provide most of the unpaid care to kids and work disproportionately part time.

The Work and Family Policy Roundtable, for example, which brings together Australia's best researchers on work and care, noted that the design of Australia's tax and transfer system has a 'strong gendered impact on families, directly shaping household decision-making about who works and who cares'. The Grattan Institute called this the 'workforce disincentive rate', which is the combination of tax, welfare settings and childcare costs. The institute noted that the workforce disincentive rate 'can be particularly punishing for the fourth and fifth day of work for the primary carer, still generally a woman'. They concluded:

Working an additional day for no or virtually no take-home pay is understandably not a choice many find attractive.

Professor Miranda Stewart, a member of the Work and Family Policy Roundtable and a national expert on our tax system, recommended several policy measures aimed at lessening the work disincentives for second income earners, which arise from those high effective marginal tax rates, including establishing a universal and affordable public early childhood education and care system. There was strong evidence from a broad range of witnesses to the work and care inquiry calling for universal and affordable quality child care. It should be free. It is a basic infrastructure for those who go to work and have caring responsibilities. As a result, the final work and care report put to this Senate recommended that National Cabinet 'progress the implementation of a universal, quality, place-based and child-centred early childhood education and care (ECEC) system'. The report was a majority supported report with support from the government.

Through the inquiry we heard story after story of the impacts of inaccessible and expensive early childhood education and care—the impacts on kids, on women, on families and on our labour supply. The evidence is very clear that the current work and care system is creating a barrier to women returning to work or increasing their hours of work. We need to think of it in the way that the absence of a road prevents people from going to work. It is as real as blocking half the roads in Australia. If we said half the roads were going to be out of commission for the next five years and people wouldn't be able to get to work half the time, that would be seen as a national disaster, yet that is exactly what is happening in relation to child care across so many of our country towns, our regions and our suburbs.

When women can't participate in work, it has a huge spillover effect on the labour supply crisis across our country right now. We are paying a big price that's personal for carers in terms of being unable to increase their hours of work and a big price for the economy and labour supply. This is even more urgent in view of our cost-of-living crisis, where people all over the country are facing huge financial pressures. We have to fix early childhood education and care. It needs be free and available to everyone who needs it. It needs to be quality care, and the educators need to be fairly valued in terms of their pay and conditions. We need to address and reduce the high effective marginal tax rates that fall so hard, especially on mothers and women workers and their families. With that, I seek leave to continue my remarks later.

Leave granted; debate adjourned.