The politics of not doing Stage 3 (Part 2)
Why adopting an alternative is more politically attractive than you might think
If the government wants to do something other than Stage 3, they need to announce it in the Budget this year.
This post will continue to explore the politics of adopting an alternative set of policies (A Better Plan).
A Better Plan
Instead of Stage 3, the Labor government could do the following
A $250 tax cut for everyone in FY23 (paid retrospectively in July 2023)
A $500 income tax cut for everyone (from July 2024)
Even cheaper childcare (less than $20 a day per child for 60%+ of families)
More rent assistance (a 40% increase)
Phase 1 of Medicare Dental (covering 7.7m Australians)
26 weeks of Paid Parental Leave (in July 2024)
This plan would cost less than Stage 3 and allow the government to pay off $4.2 billion of the Coalition’s debt in that year (costing details here).
Source: FY25 Costs - Estimated based on existing Treasury and Grattan work
Today, we will look at the political (and economic) benefits of investing more money to make childcare cheaper for families and how the the Coalition will be hamstrung in their response.
Let’s get into it.
Increased childcare subsidies will lead to an increase in GDP and give Labor a genuine ‘growth narrative’
The Grattan Institute’s report on childcare, which has clearly inspired the government’s current policy, found that for every additional $1 spent on child-care subsidies there is roughly a $2.20 increase in GDP.
The government has taken this onboard and has committed to spending an additional $1.6b on child-care in FY25, however, this is still significantly less than the $5b of investment recommended by Grattan and myself.
Further increasing the child-care subsidies to align with our recommendation would translate into a $7.5b increase in GDP.
This would be good*.
Source: Grattan Childcare Report, Oct 2022 Budget Paper No. 2
Increased child-care subsidies will
Improve the household finances of families (and make them more likely to vote Labor)
Increase GDP and potentially help stave off a recession
Help increase labour supply and mitigate skills shortages
Improve gender equality in life-time market earnings and superannuation balances
The government has a tool to juice economic growth and their GDP numbers, why not use it?
The political narrative that ‘investing in childcare is a good way to grow the economy’ is a message that already has media traction. In particular, because of Grattan’s CEO Danielle Wood’s Keynote speech at the Jobs and Skills Summit (which was incredibly well received).
Source: AFR
A lot of journalists would have listened to that speech and this narrative is something that journalists can now explain and is a story that readers are familiar with.
It makes sense to amplify and lean into this opportunity.
If Labor were to announce further increased investment in child-care they would likely receive supportive media commentary and op-eds from people like Danielle Wood (who writes for outlets such as the AFR, The Conversation and the SMH).
Increased child-care subsidies are a winner from both an economic and gender equality perspective, so why not increase focus on this policy that will leave Peter Dutton flat-footed?
Increased childcare spending and 26 weeks of Paid Parental Leave will continue to build support with women and the Coalition will be left flat-footed
The Liberal Party’s 2022 campaign review helpfully notes that a majority of women in all age segments (18-34, 35-54 and 55+) preferred Labor over the Coalition in 2022.
This is good.
Labor should continue to work hard to increase the margins by which women prefer Labor over the LNP.
Increased child-care investment and bringing forward the 26 weeks of Paid Parental Leave into this term of government, will help solidify and strengthen their support.
Presumably, the LNP would like to try and appeal to female voters and so will be reticent to attack these policies directly. My suspicion is that Peter Dutton will come across as a bit weird and off-putting to voters, particularly women, when talking about these types of issues (and may hold some unpopular beliefs!).
Labor should give him the opportunity to opine on feminism and gender equality whenever they can.
Of course, he will probably refrain from any direct criticism of the childcare spending and only talk about the tax cuts.
This will be the topic of my next post. Subscribe if you’d like to stick around and find out how this could be addressed.
*Of course, moving to a universal 95% subsidy would be even better.
For a $12b investment, Grattan estimate that GDP would increase by $27b. But that’s a conversation I’ll leave for another day.
Onwards to Part 3!