Projections and measurement

This Statement and the 2022-23 NSW Budget combines both short and long-term reforms to significantly improve opportunities for women in New South Wales.

This task is no small endeavour and touches many areas of policy. Ambitious investment is required now and into the future to yield equally large returns for women, families and the NSW economy.

Such change will require a sustained effort from the NSW Government over the next decade.

This Statement lays the foundation and embeds the path for that step change. 

Projections of the impact of early childhood education and care reforms

The early childhood education and care reforms outlined in this Statement are expected to deliver a step change in the economic prosperity of the women of NSW¹⁷².

As part of the Review, NSW Treasury modelled the estimated impact of a package of the early childhood education and care reforms on: 

• childcare availability and demand 
• labour market outcomes, with a specific focus on women 
• the NSW economy 
• NSW Government revenues 
• costs and workforce disincentive rates for example households. 

This section sets out a summary of the modelling results, with further information found in a technical paper available on the NSW Treasury website¹⁷³.

The modelling of the economic benefits applies likely behavioural responses based on international and domestic evidence.

Uncertainty in the behavioural response is reflected in the expression of projected benefits as a range, rather than a point estimate.

Assumptions have been applied regarding the detailed policy design of the early childhood education and care reforms.

The modelling results capture the integrated benefits of the Commonwealth and State measures working in a complementary manner.

While other initiatives will also contribute towards increasing women’s economic opportunity, they have not been modelled, as it is difficult to identify specific outcomes on an individual initiative level.

However, it is expected that the momentum being created by this focus on women in the workforce will drive significant change, which will be measured and monitored through the indicators identified in the next section. 

Impacts for women’s economic opportunities in the labour market 

The reduction in childcare costs and increase in access and availability from the package of early childhood education and care reforms, including the Affordable and Accessible Childcare and Economic Participation Fund (the Fund), the provision of universal pre-kindergarten and changes to the Child Care Subsidy in line with the policy commitments of the new Commonwealth Government, are estimated to achieve the following: 

• Increase the women’s workforce participation rate, which would be between 0.4 and 1.3 percentage points higher than under the baseline by the tenth year of operation (2032-33), or between 13,000 and 47,000 additional women employed. This would account for between 4.0 and 14.1 per cent of the current participation gap with men¹⁷⁴.
• Increase the average number of hours of paid work worked by women by between 0.1 and 0.4 hours per week compared with the baseline by the tenth year of operation, equivalent to between 13,000 and 48,000 women shifting from part-time to full-time work. This would account for between 1.7 and 6.1 per cent of the current gap with men on average hours worked¹⁷⁵. 
• Increase average women’s wages by between 0.1 and 0.6 percentage points by the tenth year of operation, which would account for between 2.0 and 7.6 per cent of the current wages gap with men¹⁷⁶.

Figure 22: Estimated impact of early childhood education and care reforms on women's labour market outcomes

Impacts for the NSW economy and NSW Government revenue

These improvements for women’s economic outcomes in the labour market as a result of the package of early childhood education and care reforms and the prospective changes committed by the incoming Commonwealth Government, are estimated to drive the following economic and revenue benefits:

• Increased aggregate economic activity of between $4.7 billion and $17.1 billion (in real 2021-22 dollars) each year by 2032-33.

• This translates into between an additional $1,200 and $4,400 income (in real 2021-22 dollars) per household per year by 2032-33.

• This would increase NSW Government’s own-source revenues between $158 million and $577 million per year by the tenth year of operation, primarily driven by payroll tax (between $85 million and $308 million) and increase the size of the national GST pool by between $149 million and $540 million. This would translate into between $42 million and $153 million for New South Wales if there is no change in the distribution of GST between states.

Impacts for families and workforce disincentive rates 

The charts below set out the impact of the package of early childhood education and care reforms, combined with changes to the federal Child Care Subsidy as proposed by the new Commonwealth Government

Example of middle-income household with two children in childcare that benefits from the Fund

• Primary Income Earner Salary: $95,000 
• Secondary Income Earner Full Time Equivalent Salary: $85,000 
• This represents approximately the median full-time equivalent salaries for households in New South Wales with at least one child aged 0–5. These salaries are assumed to grow in line with Child Care Subsidy indexation 
• This household currently faces a workforce disincentive rate of up to 68 per cent (on the fifth day). 
  • This indicates that a secondary income earner would take home only 32 cents in the dollar for income earned on their fifth day of work in a week, compared with working only four days per week. 

Under the combination of changes to the Child Care Subsidy and the Fund, the maximum workforce disincentive rate that this household would face would be reduced to 52 per cent.

Figure 23: Workforce disincentive rates faced by the secondary earner in the example middle income household

Example of low-income household with two children in childcare that benefits from the Fund 

• Primary Income Earner Salary: $70,000 
• Secondary Income Earner Full Time Equivalent Salary: $50,000 
• This represents approximately the 25th percentile of full-time equivalent salaries for households in New South Wales with at least one child aged 0–5. These salaries are assumed to grow in line with Child Care Subsidy indexation. 
• This household is assumed to rent, consistent with most households with children aged 0–5 earning a similar income. 
• This household currently faces a workforce disincentive rate up to 79 per cent (on the fifth day). 
  • This indicates that a secondary income earner would take home only 21 cents in the dollar for income earned on their fifth day of work in a week, compared with working only four days per week. 
  • Under the combination of changes to the Child Care Subsidy and the Fund, the maximum workforce disincentive rate that this household would face would be reduced to 62 per cent. 

Measuring our progress

The implementation of the reforms outlined in this Statement will be reviewed and monitored regularly, with reporting on the key indicators listed below as part of an annual Women’s Opportunity Statement in the NSW Budget. 

These indicators will enable the NSW Government to clearly define the desired tangible impacts and outcomes to be achieved through the reforms, as well as measure and track the success of the reforms in delivering better economic opportunities and outcomes for women over time.  

In addition to the indicators in the table, the NSW Government intends to track the progress of the proportion of NSW fathers taking parental leave and will work with industry and WGEA to develop an appropriate indicator.