Rethinking childcare
By Freya Leach
First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.
The state should support families, not seek to replace them. This is a core liberal value. In his 1942 radio address, Menzies declared that the family—especially the middle-class family—was the key to preserving freedom and democracy. He said:
"The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole."
Menzies saw the family as a bulwark against the encroachment of extreme ideologies and excessive government intervention.
For decades, we’ve been told that getting more women into the workforce by sending kids to daycare is the pinnacle of progress. It’s great for “gender equality”, good for economic growth, and vital for the development of children. Erica Komisar, a psychoanalyst and social worker was a headline speaker at the Alliance for Responsible Citizenship (ARC) conference this week. Komisar exposed why an overreliance on childcare can be damaging, and the data backs it up.
Firstly, most women who are out of the workforce with young kids have not been forced out—they’re there because they want to be. Childcare is often a last resort for families who, if given the choice, would prefer to spend more time with their children. A report from the NSW Productivity Commission revealed that the majority of parents who are out of the workforce do so by choice. In 2021, about 70% of parents in New South Wales who were not working due to caring responsibilities did so for reasons unrelated to childcare access. In other words, 70% of parents out of the workforce have the option to use childcare but prefer to look after their own children.
Secondly, as stay-at-home mother and writer Virginia Tapscott argued at the ARC conference, women’s work is so often undervalued. When mothers of young children re-enter the workforce it is not like their domestic and parental responsibilities instantly vanish. ABS data shows that part-time working mothers spend an average of 8 hours and 34 minutes daily caring for their children, while full-time working mothers dedicate 6 hours and 39 minutes per day. A mother working full-time will work around 70 hours per week – more than the average CEO. Social and financial pressures leading women back to paid work is often straddling them with the equivalent of working two full-time jobs. So much for women’s empowerment.
In Australia, the Federal Government subsidises childcare for families with incomes up to $533,280. Childcare has already improved women’s workforce participation rates to a point where further increases in subsidies will only make marginal improvements, and at a high cost to taxpayers. Women's labour force participation rates have steadily risen, particularly among mothers of young children. Between 2013 and 2023, the participation rate for mothers with children under 15 grew from 68% to 79%, driven largely by mothers of children aged 0–4. The Productivity Commission suggests that further reductions in childcare costs will have a relatively small effect on labour supply and childcare demand, smaller than those projected by previous studies.
Past studies, such as those by the Grattan Institute, predicted large effects on labour supply from greater childcare subsidies. But the Productivity Commission’s model acknowledges that the rising labour participation of mothers over the past 30 years has reduced the historical dip in participation associated with motherhood. Most mothers of children aged 0–4 already work part-time and the proportion working full-time has increased over the last two decades. The Productivity Commission’s model of the labour force impact of universal childcare found that it would only create around 10,000 full-time equivalent (FTE) workers at a cost of $7bn, or $700,000 per full-time job.
When considering future approaches we need to scrutinise the claim that sending children to childcare is better for their development. Preschool can be positive, but studies have shown that institutional childcare between the ages of 0-3 can have negative effects. One longitudinal study published in the Journal of Child Development found that children in institutional childcare had higher levels of stress, aggression, and anxiety. Another study from Harvard’s Center on the Developing Child concluded that the earliest years of life are crucial for brain development and that the quality of care and emotional bonding children receive during this period has long-lasting effects. Removing children from their mothers increases cortisol, triggering the evolutionary fight or flight response. Children end up at a higher risk of attachment issues, anxiety, depression, aggression and ADHD. While there is evidence that preschool programs and childcare for children from disadvantaged backgrounds can be beneficial, this is far from universal. Children benefit most from stable, loving, and consistent care—something that’s often better provided by parents, extended family, or close-knit community groups, not by strangers in an institution.
Arguments questioning the benefits of institutional childcare and current policy approaches are almost entirely absent from the Australian public debate. To even suggest that mothers have a unique role in nurturing children that is preferable to childcare, is almost sacrilege. But if we are to make good policy, we need to confront the facts.
The Albanese Government likes the current model, where billions of taxpayer dollars are poured into big institutional childcare centres—as does the union representing childcare workers. Yet, many parents don’t feel this rigid and inflexible system is working for them. And if you live in regional Australia away from a childcare centre, you get no benefit from this system where taxpayer funds are linked to centres. Despite the evidence suggesting there is limited benefit to greater subsidies, the Albanese Government recently commissioned a report on pathways to universal, free-for-all, childcare. The Productivity Commission was tasked with providing a model of a universal childcare policy.
It is likely that universal childcare will be a key plank of Labor’s re-election pitch. In August 2024, after announcing a 15% pay rise for childcare workers, Albanese revealed, “We’re looking at the move towards universal provision of affordable childcare.” The pay rise will last for two years, after which point Albanese hinted that universal childcare could be in operation. Again at an October caucus meeting the Prime Minister told MPs and senators it would be front and centre of what he described as “a big second-term agenda”.
However, sources within Labor suggest the Government is likely to disregard the Productivity Commission's recommendation to simply raise the subsidy rate and remove the activity test (which requires parents to be working to qualify for the subsidy). Instead, they are expected to opt for the most expensive option proposed, where all families would pay a flat rate of $10 per day for childcare or receive a 90% subsidy. While this may be an easy election policy to promote, even the Productivity Commission has criticised this approach:
“Increasing the CCS [Child Care Subsidy] rate to a universal 90% or introducing a flat fee for ECEC [early childhood education and care] is likely to disproportionately assist higher-income families who are not, in the main, facing challenges in terms of access to ECEC. These options are costly but do not lead to significant increases in labour force participation, address the inequity created by the current CCS settings, nor support greater ECEC access for children and families experiencing disadvantage.”
The benefits of implementing a flat fee or universal subsidy would flow overwhelmingly to high income families, as low income families already receive a 90% subsidy.
The Productivity Commission modelling shows this change would create an additional 7,300 workers, but would come at a substantial cost of $8.3 billion to taxpayers. This equates to a staggering $1.1 million per full-time worker. On a per-child basis, the Government would be spending approximately $21,500 annually.
Despite this policy not aligning with the needs of many families, generating limited economic benefit and costing an extraordinary amount, Albanese may try to use this as a cost of living circuit breaker, given his prospects of re-election are hanging by a thread.
The Opposition has an opportunity to offer a fresh, alternative vision for women and young families. This starts by acknowledging that childcare is not a one-size-fits-all solution. Families should have the freedom to choose how best to raise their children without being penalised for prioritising parenting over career in the early years. We need to return to viewing families as the foundation of our nation, as envisioned by Menzies.
Some avenues for reform could include:
Expanding informal care: Australians don't always have access to an institutional childcare centre meaning subsidies can be inaccessible. Parents shouldn't be disadvantaged if they use informal care arrangements, which could include grandparents, nannies or community care arrangements. Informal care has halved between 1999 and 2017 (32% to 15%) while formal care has increased by around 70% because the childcare subsidy is only available to those in formal care (a key mandate from the unions). This disadvantages families in regional areas where formal care is less accessible. Developmentally, it is often better for children to be in informal care that can provide secure and consistent attachment.
Tax Deductions for Childcare and Related Expenses: Childcare associated purchases could be tax-deductible, up to a limit, to provide financial relief during this financially challenging time.
Childcare Deregulation: Reforming the complex National Quality Framework, which imposes stringent carer qualification requirements, staff-to-child ratios and other burdensome red tape, would reduce costs. The framework, loved by the unions, has contributed to childcare fees rising faster than both CPI and wage growth.
Expand paid parental leave: So all women have the option to be with their children for a little longer during the critical early years.
Overall, the health of our nation depends on the health of our families. Now is the time for fresh, bold thinking that aligns with the preferences of families, restores the value of motherhood and views strong and resilient children as Australia’s greatest asset.