A new study says effective childcare reform could add tens of thousands to the workforce and bring a multi-billion-dollar economic boost.

Modelling by accountancy firm PricewaterhouseCoopers suggests the Federal Government's proposed childcare overhaul could boost the economy by more than $3 billion by 2020, and let the equivalent of almost 20,000 full-time employees re-enter the workforce.

The Government’s planned changes would see the currently complicated system of childcare payments streamlined into a single means-tested subsidy, giving the biggest payments to lower and middle-income families.

“By making child care more affordable, more people will want to work, and what we have found with this analysis is about half of those extra workers will come from people who are currently working part-time taking on more hours,” says John Cherry from childcare provider Goodstart Early Learning, the group that commissioned the study.

“The other half will be people not in the workforce willing to go back to work because it will now be worth their while to do so. And that then has a further economic effect.”

He said the big economic boost and workforce expansion had played out overseas.

“Well this is exactly what happened in Canada when the province of Quebec made child care more affordable in 1997,” he said.

“Seventy thousand mums went back to work within five years and some economic modelling showed that the Government got $1.51 in benefits back for every dollar they paid out in assistance.

“We know that Australian mums actually pay more in tax than they receive in childcare benefits. We know that the four times the government improved childcare assistance over the last 25 years there was actually an increase in workforce participation within two years — a big bump.”

But the proposed reforms are not perfect, some say.

Submissions to the Senate inquiry examining the changes (including Goodstart’s) argue there should be measures to ensure children from disadvantaged backgrounds get at least two days a week of subsidised child care.

There is also an overwhelming consensus that the proposed activity test in the current legislation is too tough.

“The activity test is a concern for families for one reason or another who have one parent who's not in regular work, study or one of the approved activities,” Early Childhood Australia chief executive Samantha Page told reporters.

“Early Childhood Australia would prefer to see children in their own right have access to quality early learning programs and for the activity test to apply above two days a week.

“There are many families that can't maintain both parents in work all of the time and having some level of continued participation for those children is important.”

Recently released data shows that in the March quarter last year, childcare subsidies cost the Government over $1.5 billion, an increase of about 20 per cent on the previous year.

During the same period, the cost of childcare to families increased by more than 4 per cent.