Australian childcare costs outstrip increase in government subsidy
The rising cost of childcare in Australia has outstripped the increase in the government-provided subsidy, with parents on average paying more than $10 an hour for care.
The latest quarterly childcare report released by the education department reveals for the three months leading up to the end of March this year that the average hourly childcare fee was $10 – 4.4% higher than the same time last year.
Parents who used family daycare paid on average $10.55 an hour.
Parents, on average, enrolled their children for three days of care a week, leading to average out-of-pocket costs of more than $5,000 across the year for a parent earning $85,000.
The quarter accounts for a time before the government temporarily increased the subsidy to cover childcare costs for parents at the height of Australia’s response to the Covid pandemic.
It also covers a time before the freeze on childcare rates was lifted – fees were frozen until September this year because of the pandemic. Slated increases for centres were then given the go-ahead.
While eligible parents have access to government subsidies for childcare, the subsidy is income and activity tested, and linked to CPI, following a change in policy in 2018.
CPI has sat under 2%, meaning the fees continue to outstrip the increase to the subsidy. It’s not a total surprise – the government’s own predictions showed family daycare prices increasing by 3% this financial year in a forecast released two years ago.
That forecast showed childcare costs continuing to grow at a rate above CPI year-on-year. The recession means the gap between childcare costs and the subsidy is expected to grow even faster.
If fees continue to grow at a higher rate than the CPI, the government forecasts that fees for long daycare will grow by more than 4% each year over the forward estimates, then they will overtake the hourly fee caps and families will be required to cover more of the growing costs of care.
The education department report on childcare costs showed the total estimated expenditure for the March quarter was $1.94bn, which was down by almost 10% from the December quarter when $2.14bn was spent, and just over 6% higher than the $1.82bn spent in the March 2019 quarter.
About 60% of Australian families using childcare have their children enrolled in centres while just under 10% have chosen family day care, with the rest broken up in a variety of after and before school care programs.
The shadow childcare minister,
Amanda Rishworth, said the figures showed why Labor’s proposed childcare policy – which seeks to scrap the annual $10,560 subsidy cap, while increasing the maximum subsidy to 90%, cutting out-of-pocket costs for 97% of families – was “crucial”.
Rishworth said the latest increase in childcare costs “failed” families and “failed to support working parents, particularly women, to work fulltime or increase their hours”.
“The Morrison government’s own data has confirmed Australian families are paying more and more in childcare fees,” Rishworth said.
“It is these large fee increases that the Morrison government gave the green light to at the end of September. As a result families will likely again be hit by soaring fees – this time in the middle of a recession.
“This data confirms urgent action must be taken to provide relief for Australian families who are being crippled by soaring childcare fees.”
The government has rubbished Labor’s plan, accusing it of setting up a system where lower income workers will be subsidising higher income workers for childcare costs.
Labor has defended its plan by saying childcare should not be treated as welfare, and lower income workers would receive the biggest benefit.
The education minister, Dan Tehan, did not respond to a request for comment ahead of publication.