So, the prime minister is going to spend his summer break “tweaking” his signature paid parental leave (PPL) policy and figuring out how to divert the savings into more childcare support for families.

Not much time these holidays for lycra shorts and the bike then, Tony.



Speaking politically, the PM doesn’t need to tweak the PPL. He needs to trash it and issue a genuine mea culpa – to his cabinet colleagues who had no hand in creating this policy disaster, to his backbench who lost dangerous amounts of blood as the wound deepened, and to the Australian people who rightfully can’t work out why their government wants to charge poor people $7 to see a GP but give women on six-figure salaries tens of thousands of dollars to have a baby.



However, the prime minister seems intent on trying to sweeten the bitter pill of his PPL with a dose of childcare sugar. At least he is starting to understand that childcare – and not a gold-plated PPL – is what Australian women want and need to get back to work after a baby is born.



Australia already has a paid parental leave scheme. Labor brought it in and it is good policy. What Australia doesn’t have is a childcare support scheme that is simple to use, well-targeted, flexible and effective at increasing women’s workforce participation.



Increasing women’s employment participation, especially to increase tax revenue and offset the impact of an ageing population, is the key reason that government should subsidise childcare.



Yet under the current system, women are disincentivised to work. All women receiving the childcare subsidies and rebates perversely lose income as they increase their work hours – and the impact is hardest felt by middle and low-income workers. Any new approach needs to address this financial disincentive to work for those at the bottom end of the income scale. In part, this means more means-testing and better targeting support.



Furthermore, any new approach needs to appreciate that the current subsidies and rebates have succeeded in making childcare more affordable and yet are still failing. A National Centre for Social and Economic Modelling report earlier this year shows that, after government subsidies, the cost of childcare has risen just above CPI and less than the growth in incomes – but with no corresponding jump in women’s workforce participation.

Part of the reason for this failure may be that the current subsidies and rebates heavily favour the most inflexible form of care – formal care, usually in a long day setting. As a result, the majority of mothers either choose long day care or receive no assistance because they use informal care – like grandparents. Including such informal care – nannies, grandparents – in a subsidy scheme is worth considering.



That being said, everyone needs to be wary of the nanny debate – particularly everyone in a government already battling a perception that it favours the rich over the poor. I’d like to see modelling on what level of subsidy would be needed to allow a mother on $65,000 (the average salary for a woman who works full-time) to afford an Australian-qualified childcare worker as a nanny in her home. I imagine it would be quite high. I also would like to see modelling that shows that such a use of taxpayer dollars would move women in any notable numbers into the workforce.



Nonetheless, it is worth considering. Perhaps the best way forward is to dump the current childcare rebate and the childcare benefit in favour of a simple system: a single payment, means-tested, up to a set amount of hours per week, for families to direct to the kind of care that best suits their needs. The Productivity Commission seems to be moving in this direction.

Even after all this, the reality remains that government subsidies for childcare will only achieve so much when it comes to increasing women’s workforce participation. The draft Productivity Commission’s report recommends a simplified and flexible subsidy that would cost $8bn a year and would only lift labour supply by 0.4% (47,000 workers) and adds 0.4% to GDP ($5.5bn).



At first blush, that seems like not a lot of return for $8bn. But children need care for a relatively brief period in their parents’ entire working lives. Helping women stay in the workforce or re-enter after a short time away is an investment that pays off across many years.



Finally, we all have to acknowledge that government can’t do everything. Employers have a significant role to play. So too do fathers. Flexible work arrangements, job sharing, working from home and other options that make it easier to retain working parents – mum and dad - will need to be part of the solution.