Childcare concessions and property prices
Written and accurate as at: Apr 26, 2023 Current Stats & Facts
The Australian Child Care Subsidy (CCS) has transformed families' lives by making childcare more affordable and promoting dual-income households. Coupled with a narrowing pay gap, albeit painstakingly slowing, are contributing factors that positively impact the labour and property markets.
As a comparison, the United States offers limited childcare concessions, leading to differences in labour markets and dual-income families.
The US childcare system is primarily privatised, with limited federal and state subsidies. Consequently, the average American family with a young child under five must allocate about 13% of their income to childcare expenses, according to the U.S. Department of the Treasury (2021). This burden discourages parents, especially mothers, from returning to work, perpetuating gender disparities in workforce participation and impacting household incomes.
The Australian CCS has created a more accessible and affordable childcare system, supporting dual-income households and positively impacting the labour market. Data from the Australian Bureau of Statistics (2022) reveals that 74.7% of couple families with children under 15 have both parents employed, compared to a 65.0% rate in the US, as the U.S. Bureau of Labor Statistics reports. Australia's higher percentage of dual-income families leads to a more dynamic labour market and increased productivity.
Meanwhile, the Australian gender pay gap between full-time male and female workers has narrowed over the last 40 years, from 23% in 1981 to 17% in 2019. The CCS contributes to closing this gap by enabling more women to continue working while raising children.
While the gender pay gap is slowly closing, additional work and wage increases have seen couples with dependent children's income more than double over the last twenty years after adjusting for inflation, according to the ABS and the Australian Institute of Family Studies (2020).
The increased income of dual-income families in Australia have greater purchasing power and can afford to pay more for a home, leading to increased demand and competition in the housing market. This increased demand drives up property prices, particularly in desirable locations, cities and areas with good job prospects.
A higher income means the household has more money to cover the mortgage repayments, which allows the lender to offer a larger loan to the borrower, which can be used to purchase a more expensive property. For example, suppose a dual-income family previously had a combined income of $100,000. In that case, their borrowing capacity may have been limited to around $500,000. However, with an increase in pay to $150,000, their borrowing capacity could increase to around $750,000, allowing them to purchase a more expensive property.
In conclusion, the Australian Child Care Subsidy (CCS) has played a transformative role in families' lives, making childcare more affordable and promoting dual-income households. This, in turn, has contributed to a more dynamic labour market and helped narrow the gender pay gap. As a result, dual-income families have seen significant increases in their incomes over the past two decades, allowing them greater purchasing power in the property market.
The success of the Australian CCS model highlights the importance of comprehensive childcare policies in promoting economic and social growth. By investing in accessible and affordable childcare systems, countries can create an environment that empowers both parents to participate in the workforce, reduces gender disparities, and drives a more dynamic and prosperous economy. This, in turn, has a positive ripple effect on the property market, as increased household incomes enable families to afford more expensive homes, fueling demand and competition.