Free childcare has shown the benefits of generous government subsidies

One of the weirder moments of the COVID-19 crisis has been watching a conservative government introduce universal free childcare – if only temporarily.

Since April 6, none of the 945,000 Australian families with a collective 1.3 million children enrolled in childcare have had to pay a single cent in fees.

Of course, many parents have opted to keep their children at home, which had prompted fears that four in five centres would become unviable and close their doors permanently.

But thanks to the Morrison government's swift action to waive fees and pump $1.6 billion into the sector, just 1 per cent of childcare centres have gone under during the crisis.

It's not been without faults. Under the initial package, the government agreed to pay half of centres' mandated minimum running costs, as determined before the crisis. The government's JobKeeper wage subsidy was supposed to cover the rest, with wage bills making up about 60 per cent of total centre costs.

But some childcare providers have still suffered losses, because they have either not qualified for the JobKeeper subsidy or it does not cover them for their casual staff or foreign employees on visas.

But despite these failings with the package, childcare providers are warning of even more dire consequences if it is allowed to expire on June 30, as planned.

The government has indicated all along it wants childcare to "snap back" to normal. But as any mother knows, it often doesn't work that way.

The impact of the coronavirus shutdown is set to leave a permanent scar across the entire childcare industry.

Centres are currently seeing a surge in demand while free care lasts. But when fees are reintroduced, many parents are expected to withdraw their children from care. Unemployed parents will no longer be eligible for subsidised childcare under reforms to the system, introduced a few years back, which mandated a stringent work "activity" test.

Many jobless families will no longer meet that test. Or, rather, they may meet it one week and not the next if they have variable hours, throwing into doubt whether they'll qualify for cheap care for their children.

No child deserves the uncertainty of being put into care and withdrawn from week to week. Children, as we know, thrive on routine. And all the best international evidence we have suggests they also thrive on the early learning opportunities that childcare presents.

Australia's school admission age of five was introduced a century ago, before any of these benefits were known. It seems kind of arbitrary now that universal free care should start from five years old. Why not four? Why not three?

Sure, many parents are able to provide wonderfully stimulating home environments before the age of five – particularly wealthier families. Studies show the benefits of early institutional care are highest for kids from vulnerable backgrounds where the home environment may be less supportive of child development. And evidence for the benefit to children of childcare before the age of two are less well established.

No one is saying babies should be ripped from their mothers bosom and forced to learn maths. Of course, families must make decisions for themselves about how best to care for their babies and infants in a way that balances their family's need for income and a mother's desire to return to work. But the past two decades have seen a radical shift in the choices Australian families are making, and they're only heading in one direction.

Modern Australian families need to be supported by a system which delivers affordable and high- quality childcare to support them in making those decisions. Some would argue for universal free childcare for all kids. That would be hugely expensive – costing about $14 billion more a year on top of the $8 billion annual bill already borne by taxpayers for childcare.

An easier option, says Danielle Wood of the Grattan Institute, would be for the government to phase back in an expanded subsidy scheme, one which suspends – at least temporarily – the work activity test and increases the maximum rate of subsidy from 85 to 95 per cent of out of pocket costs. This would cost about an extra $5 billion a year.

Doing so would mean 60 per cent of families would pay less than $20 a day per child for childcare. It would also boost the economy by an estimated $11 billion a year. Why? Because by lowering the cost of care, it would reduce the penalty second income earners – usually mothers – face when deciding whether to re-enter the workforce, or increase their hours of work.

Australia has the third-highest rate of women working part-time. It's not necessarily a choice. Why work when a sizeable proportion of your income will be gobbled up by taxes and childcare?

As we emerge from the shadow of the coronavirus (touch wood) we need all hands to the wheel to get Australia working again. The government is considering its next plan for childcare. It's not sensible to expect it to keep universal free care – nor necessarily desirable, given the big free kick that would deliver to wealthier families. But whatever plan they come up with, it should err on the side of generosity. Investments in quality childcare pay dividends.

Jessica Irvine is a senior writer.