This was published 4 months ago
Opinion
Axing this Catch-22 could add 40,000 workers to the economy. What are we waiting for?
Terese Edwards
CEO, Single Mother Families AustraliaPicture this: A mum with two children under five wants to return to work part-time after separating from her partner. The first step in returning to work, you’d imagine, would be to secure places at a childcare centre, so she can advise potential employers of her availability.
But it’s here a catch-22 emerges. Without guaranteed employment, a parent is entitled only to minimal childcare subsidies from the government, and the out-of-pocket cost for paying for multiple days of childcare until you find work is impossible for most single parents. Without childcare, though, finding work is also near impossible.
Abolishing the Activity Test would allow more children access to early education and allow more single parents to return to work.Credit: iStock
The cause of all this is a 2018 policy called the activity test, which determines how much government-subsidised care children are eligible for – in other words, how affordable childcare is – based on how many hours their parents work, study or undertake other approved activities.
The test was designed as an incentive for parents to return to work and to increase women’s participation, but in reality it has done the opposite. In part, this is because parents – especially single mothers – need stable and affordable childcare in order to look for a job, attend interviews, and give potential employers certainty about their availability.
A 2023 analysis by Impact Economics and Policy found almost 40,000 Australian women are facing this predicament, and that more than half were single parents. It also shows the test is keeping around 126,000 children out of early education, with the children of single parents, children from low-income families and First Nations children disproportionately impacted.
The Albanese government has delivered some much-needed, welcome changes for single parent families since coming to power. Last year, the government announced its plan to scrap the ParentsNext program, and expand eligibility for the Parenting Payment Single to parents of children aged up to 14. These changes are no surprise given the prime minister himself growing up with a single mother.
With the federal budget now around the corner, the government has a chance to continue its reform in this area by abolishing the activity test. Doing so would make it easier for single parents, particularly single mothers, to work or study, and for their children to benefit from formal early years education.
It’s estimated that abolishing the activity test would cost $1.3 billion. But the long-term social and economic benefits cannot be understated. According to Impact Economics, abolishing the test would add $4.5 billion to GDP as a result of almost 40,000 women rejoining the workforce.
At a time when Australia is experiencing a critical skills shortages in female-dominated industries such as healthcare, social assistance, education and training, keeping tens of thousands of women out of the workforce simply because they cannot access affordable childcare seems beyond counter-intuitive.
For mothers wanting to up-skill or re-skill, affordable childcare would mean the opportunity to study. The National Skills Agreement acknowledged the need to better support women wanting to undertake vocational education, and abolishing the test would support this.
Making childcare more affordable by abolishing the activity test would also be incredibly beneficial for children. Currently, one in five Australian children start school developmentally vulnerable. Attending high-quality early childhood education programs has been shown to reduce the likelihood of this and set children up for success at school and later in life.
It is simply not fair that children should be denied the best start to life because their parents do not work enough hours to meet an arbitrary threshold – especially when that parent is their sole or primary carer.
Getting policy right can lead to intergenerational benefits. But getting them wrong, and holding on to damaging policies, also has the power to lead to intergenerational disadvantage.
Single mothers, who already hold down one critical job, don’t want to miss out on workforce opportunities, the chance to build a career, gain economic security and set up their kids up to thrive. But childcare places, like jobs, don’t always come along the moment you need them.
No one should have to turn down an opportunity to work simply because they’ve been unable to secure affordable childcare.
Terese Edwards is the CEO of Single Mother Families Australia.
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