Calls for next federal budget to abolish the activity test

Findings from a new report by Impact Economics and Policy released today show more than 264,000 women in households with children under the age of five are currently not participating in paid work due to caring responsibilities.

THE PARENTHOOD CALLS FOR NEXT FEDERAL BUDGET TO ABOLISH ACTIVITY TEST AS NEW REPORT REVEALS MASSIVE BENEFITS FOR WOMEN’S WORKFORCE PARTICIPATION AND WIDER ECONOMY

Findings from a new report by Impact Economics and Policy released today show more than 264,000 women in households with children under the age of five are currently not participating in paid work due to caring responsibilities.

The report finds that reducing search costs for women with young children through abolishing the Child Care Subsidy activity test could increase the participation of mothers with children under 5 years of age by 36,830 and will grow the Australian economy by over $4.5 billion dollars annually.

Data from the report also showed that increases to Paid Parental Leave entitlements legislated in 2011, helped inject over $8.5 billion into Australia’s GDP in the past year alone by allowing over 74,245 women to re-join the workforce in 2022-23.

CEO of The Parenthood, Georgie Dent, said that the findings of the report reflects the lived experience of families who have faced barriers thrown up by the activity test when needing access to early learning that fits their family situation, particularly for First Nations parents, single parents and low-income families.

“The evidence is clear; the activity test not only restricts hundreds of thousands of Australian children from accessing the lifelong benefits of high-quality early learning, it also is locking far too many parents, mostly mothers, out of paid work.

“Abolishing the activity test would ensure children in families with low income or parents in casualised work can have greater access to early learning that supports their development and education.

“The goal of the activity test was to incentivise parents to re-join the workforce and it is clear that it has failed in doing so. It has instead made pathways for re-entry extremely difficult and increasingly narrow.

“The Productivity Commission has looked at the activity test but what they failed to account for is that women don’t just need appropriate care from the day they return or find new employment if they choose to take time off after work after their child is born. They need access to appropriate care when they’re applying for jobs, attending interviews and otherwise in the job-hunting process.

Australia must make it easier, not more challenging for parents to rejoin the paid workforce.

“That’s why we’re calling on the Federal Government to abolish the activity test and legislate an increase to Australia’s paid parental leave entitlements in the upcoming May Budget.

Analysis from the report indicates that the majority of the participation increases would be amongst women in households with incomes below $72,000. The estimated increases in workforce participation within this cohort are assumed to be over 20,790, over 50 per cent of these gains would be amongst single mothers.

“This means that some of the most vulnerable groups in our society will benefit the most from these changes.

“To make meaningful reductions in our nation’s gender pay gap, to allow parents the opportunity to re-enter the workforce, to make high-quality early learning and care truly accessible by all families, we must abolish the activity test and legislate increases to Australia’s paid parental leave entitlements,” she said.