A key feature of next week’s ‘women-friendly’ federal Budget will be a new policy to make childcare cheaper and boost women’s workforce participation. But the devil will be in the detail. This article explains how the new policy will work, what it actually means for families and the economy, and how it compares to Labor’s policy. What is the new policy? The Coalition’s policy will increase spending on the childcare subsidy, from July next year: an extra $1.7 billion over three years, about a 6 per cent increase on the current investment. The policy has two main components. First, it drops the annual cap. Under the current system, families earning more than $189,390 have their total subsidy capped at $10,560 per child per year. Once families hit the cap – generally if they have their children in care for four or more days a week – they pay the full cost of care. These costs are often prohibitive and the
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Making childcare tax-deductible would be a backward step. Most families, and especially low-income families, would be worse off than under the subsidy. And work disincentives would be even worse than they are now.
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