Market forces under current policy settings are failing Australian families when it comes to childcare, a new report from the national consumer watchdog says.
The Australian Competition and Consumer Commission (ACCC) has released its second interim report on early childhood education and care, finding that families with two children under the age of 3 are spending 16 per cent of their household income on full-time daycare. This figure is much higher than the OECD average, which sits at 9 per cent.
Australia ranks 26th out of the 32 comparable countries in the OECD for having expensive childcare.
The ACCC report notes that from 2018 to 2022, nominal gross fees in Australia increased by 20.6 per cent in comparison to the OECD average of 9.5 per cent.
In real terms, the increase was 7.3 per cent in comparison to the OECD average of minus 7.1 per cent.
“This is comparable to our June interim report finding that, from 2018 to 2022, the average session fee for centre based day care in Australia increased by 20.8%, although we found a lower real increase of 4.8%,” the watchdog wrote in its report.
“One reason for the relative increase in gross fees in Australia is likely to be a relative increase in the provision of supply-side subsidies in other OECD countries.
“The fact that the OECD average real gross fee decreased from 2018 to 2022 by 7.1 per cent, when the average CPI increase was 17.8 per cent, suggests that other OECD countries have significantly increased supplyside subsidies, whether through government provision of childcare services or operating subsidies for private providers.”
In July this year, the federal government raised the maximum childcare subsidy rate from 85 per cent to 90 per cent and also introduced a more generous income test. The ACCC report indicates that the changes “had a limited effect in placing downward pressure on prices and limiting the burden on taxpayers”.
It also states that the “Child Care Subsidy is complex for parents and guardians to understand and it is difficult to estimate out-of-pocket expenses.”
In comparison, the ACCC says that many OECD countries “are moving toward greater regulation of childcare fees such as low fees or free hours for parents and guardians, supported with supply-side subsidies to cover providers’ costs of provision”.
Chair of the ACCC, Gina Cass-Gottlieb said that the report shows market forces under current policy settings are not delivering on accessibility and affordability for Australian children and families.
“Quality childcare is essential for Australian families. Early childhood education can help children reach developmental outcomes and supports parents and guardians to work and study,” Cass-Gottlieb said.
“This analysis provides important new insights into the costs of supplying services, how parents and guardians choose to use childcare and provides an evidence base for important policy discussion and consultation.”
Cass-Gottlieb noted the report highlights key areas in which changes could lead to better outcomes for the community, particularly those needing childcare in lower income households and in very remote locations.
“We have made draft recommendations to re-examine childcare policy settings, and are now seeking feedback from childcare providers, educators, families and interested community organisations.”