A report by Dr Janine Dixon, Senior Research Fellow at Victoria University’s Centre of Policy Studies, entitled ‘A comparison of the economic impacts of income tax cuts and childcare spending’ compares the cost, employment creation and impact on GDP of increased spending on child care and income tax cuts.
Dr Dixon finds that increased public funding for childcare is nearly 20 times more effective at creating jobs than a tax cut of the same size. Her key findings are:
1. almost 450,000 Australians with children under 5 would like to work more hours
2. if these parents worked an additional 10 hours per week then, by 2030 GDP would increase by $15B pa
3. net government spending of $2.8B on additional childcare would create around 135,000 jobs per year by 2030, but a similar expenditure on tax cuts would create less than 10,000 jobs.
Modelling by The Australia Institute shows is that spending money to directly employ people in childcare and directly helping those people who are currently prevented from working is a much more effective way to create jobs than to give money to people who are already working full time in the hope that they might work even more.