Nordic Countries Show Free Childcare Key to Economic Recovery

The Government’s decision to end free childcare come July is at odds with its own economic goals, as new research by The Australia Institute’s Nordic Policy Centre reveals policies that make it easier for women to choose to go back to work will see the country recover faster from the COVID-19 economic crisis while also reaping billions in benefits for all Australians over the long-run.

The report, by Australia Institute chief economist Richard Denniss and senior economist Matt Grudnoff, shows that by increasing the labour force participation of women to levels seen in many Nordic countries, through policies such as the provision of free childcare, the Australian economy would be up to $140 billion larger.

Key Findings:

  • Nordic countries have much more generous childcare policies and much higher rates of female participation in full-time work.
  • Compared to Nordic countries, Australia’s female participation rates fall significantly at the ages when the largest number of people are raising young families-a simple way to increase participation rates is by helping secondary income earners, often women, re-enter the workforce after the birth of a child.
  • If Australia had the same labour force participation rates as Nordic countries do, then the economy would be $60 billion, or 3.2% of Gross Domestic Product (GDP), larger.
  • If Australia had the same participation rates as Iceland, the Nordic country with the highest female participation rates, then Australia’s GDP would be $140 billion, or 7.5%, higher.

“The Prime Minister himself has repeatedly highlighted the significant economic gains that have flowed from the temporary provision of free childcare,” said Richard Denniss, chief economist at The Australia Institute.

“Not only is free childcare a form of fiscal stimulus, boosting consumer demand by increasing the disposable income of families with young children, but in the long run, it will significantly grow GDP and make Australia a far more equitable country.

“The empirical evidence makes clear that spending on services like childcare creates more jobs per $1 million spent than expenditure in areas like construction. The government’s focus on stimulus spending in male-dominated industries risks stymying economic recovery.”

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