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Richest to lose most under new childcare funding laws

After 18 months of flip-flopping, the government’s changes to childcare funding have finally passed the senate with the support of One Nation, the Nick Xenophon Team and independents Cory Bernardi, David Leyonhjelm and Derryn Hinch.

The bill’s changes, which comprise a $1.5 billion investment, can be summarised as follows:

  • Families earning over $350,000 are no longer entitled to a childcare subsidy.
  • Subsidies for families earning between $185,710 and $350,000 will be capped at $10,000 (they were previously capped at $7,500).
  • Childcare fees capped on an hourly basis.
  • A revised activity test, whereby both parents must work or study for at least eight hours per fortnight to obtain subsidised childcare.
  • Families who earn less than $65,710 and do not meet the activity test will be entitled to up to 12 hours of subsidised childcare per fortnight (they were previously entitled to 24 hours).

Though a concession was made – $61.8 million in existing childcare funding for ­Indigenous, remote and disadvantaged communities was preserved – many still aren’t satisfied.

Organisations like Early Childhood Australia, along with Labor and the Greens, wanted the minimum childcare entitlement to be increased from 12 to 15 hours per week, and the activity test to only be applied to those earn over $100,000 per year (it kicks in at $65,710).

“Whilst 75 percent of families will be better off under the Childcare Package…families on low incomes will have their access to subsidised early education cut in half, while other families will miss out altogether,” said Early Childhood Australia chief executive Samantha Page.

“It is a shame that the benefits do not extend to those who need it most.”

Yet the government’s aim wasn’t just to make childcare cheaper for the sake of families’ purse strings; it was to make it cheaper to encourage more women to go into the workforce instead of looking after their kids.

“We face challenges in workforce productivity and participation, where child care costs are a barrier. We are fixing that through these child care reforms,” education minister Simon Birmingham declared in a doorstop interview last week.

To this end, ANU economics professor Robert Breunig claimed the bill’s efficacy might be limited.

“One might expect an overall positive impact on total female labour force participation but this depends greatly upon the economy’s ability to deliver jobs,” he wrote in The Conversation.

“Female labour force participation is already widespread, so this policy will not generate a huge new pool of workers.”

However, Breunig recognised that, overall, the changes should lift economic outcomes, due to more kids being educated.

The bill’s changes are due to take effect in mid-2018.

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