Australian Government Warns Against Unreasonable Childcare Fee Hikes as Higher Subsidy Kicks in

Kindergarten students work on an activity at Annandale Public School in Sydney, Australia, May 25, 2020. AAP Image/Joel Carrett

The Australian government has warned childcare providers across the country to refrain from taking advantage of the upcoming lift in childcare subsidies to raise prices.

This comes as the federal Labor government’s “cheaper childcare” policy will take effect from July 1, allowing Australian families with young children to claim more rebates for childcare costs.

Federal Education Minister Jason Clare touted the new law’s benefits, saying the average out-of-pocket cost borne by over a million families would drop from $40 (US$26.5) to $27 a day.

While the government currently holds a positive view toward the changes, there have been concerns that childcare fee hikes will eat up any savings provided by the new subsidy rates.

In response, Clare assured the public that the Australian Competition and Consumer Commission (ACCC) was monitoring the industry for unreasonable price increases.

“They’re watching what’s happening right now to see whether centres are playing by the rules or not, whether they’re lifting prices in accordance with inflation or not,” he told reporters.

“If they don’t, then they stand ready to act and give us the recommendations we need to make sure parents get value for money.”

Similarly, Prime Minister Anthony Albanese firmly believed Australian families would benefit from the policy.

“The Australian Competition and Consumer Commission, with making sure that childcare businesses don’t take up the opportunity of the increased subsidies to see it go towards their businesses,” he said.

“We want families to benefit. And the ACCC will be on the case.”

Australian Prime Minister Anthony Albanese visits a childcare centre in Perth, Australia, on May 16, 2022. Lisa Maree Williams/Getty Images

Meanwhile, the Opposition did not expect the cheaper childcare policy to bring about a positive outcome for working parents.

Pointing to the recent rises in childcare fees across the country, deputy opposition leader Sussan Ley said parents would still have to pay more in the long term even with increased subsidies.

“The subsidies that we’re talking about that come in tomorrow are being eaten up by increases in fees, and that’s what I’m seeing all around me,” she said.

“Parents are not necessarily going to find that they’re paying less.”

Childcare Providers Raise Fees as Inflation and Rising Costs Bite

Prior to the cheaper childcare policy taking effect, many service providers around the country have announced a new round of fee increases for the 2023-2024 financial year.

For instance, G8 Education, Australia’s largest publicly listed early childhood and care provider, said its fees would go up by 3.9 percent in July, following a six percent increase in January.

Not-for-profit Goodstart Early Learning will also lift its fees by 7.8 percent.

The childcare providers cited the record-high minimum wage increases by the Fair Work Commission in early June and an uptick in other operating costs as the main reason for raising childcare fees.

According to a report by the Australian Childcare Alliance, the childcare industry was facing calls to increase employees’ remuneration due to labour shortages and low wages.

The alliance estimated that a 15 percent wage increase similar to the aged care industry would cost childcare providers between $0.9 billion and $1.3 billion.

Children play football at the University of Tasmania Oval in Launceston, Australia, on March 10, 2018. Robert Cianflone/Getty Images

It then called for a direct wage subsidy to prevent higher costs from following through to struggling families.

Meanwhile, some service providers have urged the government to take action against childcare operators who raise prices unreasonably.

“Families will be better off financially regardless of increases, but providers who use this nation-building reform to build more profit off the backs of educators and families shouldn’t be given a free pass to price gouge,” Early childhood group Thrive By Five director Jay Weatherill said in comments obtained by AAP.

“A small price increase to pay for better early education will benefit children and families and would be offset by an increase in the subsidy, but anything beyond CPI or that doesn’t contribute to better quality is unacceptable.”

Government May Consider Medicare-style Universal Childcare

As the cheaper childcare policy is about to come into effect, the education minister also flagged the idea that the government might look into the possibility of establishing a Medicare-style universal childcare system.

However, Ley doubted that the Labor government would be able to roll out such a significant reform.

“He’s promising free childcare in the future where we can’t even get cheaper childcare now,” the deputy opposition leader said.

“A universal scheme, who’s going to pay for it? Is this government going to have to raise taxes to do that?”