In late 2010, Australia quietly passed an important economic milestone — and not a good one. According to Australian Bureau of Statistics figures, in November and December 2010, Australia’s workforce participation rate peaked, in trend terms, at 65.7%. Since then it’s been falling; it now stands at 64.7%, although at least it remained at that level for the whole of 2014. The steady rise in female workforce participation that had been occurring since the 1970s ended at around the same time male workforce participation began drifting lower. Cyclical factors account for a substantial part of this change — employment conditions have been much softer since 2010, and a return to stronger growth could cause participation rates to pick up again. But the figures illustrate one of the biggest “intergenerational” challenges the economy faces: maximising our workforce potential.

Childcare is an important part of the participation problem: access to affordable, high-quality, flexible childcare is critical to enabling parents — and in Australia that still means mothers, by and large — to return to the workforce. But the Productivity Commission’s latest report doesn’t offer a lot of hope: its proposed realignment of childcare expenditure, intended to ensure low- and middle-income earners receive greater subsidies than higher-income earners, will only bring an additional 16,400 people in the workforce — an almost negligible increase.

The government correctly understands that additional investment in childcare is therefore needed if we’re to reduce the impediments to participation — especially now that the Prime Minister has abandoned his unnecessary and expensive paid parental leave expansion. The risk is that the government’s parlous political state gets in the way of good policy, and turns what should be a targeted mechanism for giving Australians more options for balancing parenting and employment into an electoral bribe.

Getting childcare policy right is a key challenge for a government that wants us to focus on intergenerational issues. And that will require more funding.

Peter Fray

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