Should the government provide free childcare through public schools?

The Australian government will spend $8.6 billion on childcare this year. It is a good thing for government to invest in, as there is strong evidence to support the benefits of early childhood education and care (ECEC), including improvements to children's education and social outcomes, gender equality and the economy. However, to maximise these benefits, and therefore the efficacy of this investment, ECEC needs to be more affordable, flexible and equitable. To deliver on this we need to rethink the structure of this system.

In spite of the federal government's sizeable investment in ECEC, it remains expensive and difficult to access for many families. This means the benefits of ECEC are not being maximised for Australian children or the Australian economy. Early childhood educators and workers are poorly paid, while at the same time the industry is not particularly profitable for providers. Ultimately the system is failing.

I believe publicly available ECEC delivered within our public school system would unlock better outcomes for children, parents, early childhood educators, and the Australian economy, while delivering better value for federal government investment. The scheme should be universally available but not compulsory.

The benefits of an early childhood education are well known, particularly for disadvantaged children. James Heckman, a Nobel laureate in Economics, found that investment in early childhood education for disadvantaged children improves their economic and health outcomes. It also delivers a seven to 10 per cent return on government investment every year for the rest of that person's life. In Australia, PwC has estimated that investing in childcare for disadvantaged children could boost the Australian economy by $10.3 billion per year. One of the fundamental drivers of equality in Australia is our public schooling system. This could be extended to ECEC, where dollar-for-dollar the lifelong benefits are even more pronounced.

It is clear that the promised efficiencies and consumer satisfaction of a privatised system have not been achieved in the Australian ECEC industry. All parents with children in childcare know how difficult it is to find a place for their child. The cost of childcare has increased by 30 per cent on average since 2013, despite increasing government expenditure on subsidies.

A key concern of a proposal to create a public ECEC system is the impact on private business. However, the Productivity Commission researched the profitability of the ECEC sector and found that "profitability of the ECEC sector is variable, across both providers and from year-to-year... it is mostly a low margin activity with relatively stable long-term returns, underpinned by substantial government subsidisation of user fees." The industry is low-profit and largely reliant on government subsidies. To allow choice and ensure a smooth transition from the current scheme, the government Child Care Subsidy could continue to be available to families opting to use privately provided ECEC.

Publicly available childcare, with improved accessibility, would enable parents to have a broader and more flexible discussion about balancing work and caring for young children. Currently the costs of childcare factor heavily into the decisions that the sole parent or secondary (lower) earner makes about whether they will return to work, and how much they will work if they do. When they are combined with the effective marginal tax rate equation (the amount of income retained from extra work after tax increases and any social security payments are reduced), for some parents these childcare costs can mean that it is simply not worth returning to work, or taking on an extra day.

Because sole parents and secondary earners are predominantly women, these calculations entrench the idea that the choice between caring for children and working is one for women alone to make. Taking the cost out of this decision would promote a more open discussion of the benefits of both parents sharing the opportunity to work and caring for children.

We know that good-quality, accessible childcare improves outcomes for gender equality in the workforce. In Sweden, where the government has legislated to confer childcare as a right immediately following parental leave, 76.2 per cent of women participate in the workforce. The OECD average is 61.7 per cent.

Increased female labour force participation and attachment to the workforce after having children would help to address the retirement income gap, and the increased likelihood of living in poverty in their older age that women in Australia currently experience. A more balanced sharing of parenting responsibilities between the sexes would also allow more men to enjoy this special time of life and to bond with their young children. The normalisation of taking time out of work to care for young children (and other relatives) for both sexes would be a major advancement for gender equality in the workforce.

As treasurers from both sides of politics have always said, budgets are about choices. That is certainly true, and making the decision to essentially extend the education and care that primary schools provide would require significant investment in planning, infrastructure and people. However, the cost of the current, broken system is significant. We should invest this money in a new system that will increase workforce participation and gender equality in workforce decisions, and improve the lives and capability of our children.