The cost of childcare in Australia is expensive, inconsistent and fraught, much like the conversations that often surround it.
What it costs to have a child in day care around Australia varies from as little as $60 to as much as $160 a day. Due to short supply and long wait lists there is rarely much choice about where a family sits on the price spectrum; usually a family will pay whatever it costs where they get a position. Price remains a moot issue for families who can’t get a position.
For the lucky families who do find childcare, regardless of the exact amount they pay per day, it’s a rarely an inconsequential cost. Having one child in daycare four days a week with a price tag of $100 a day adds up to $20,000 a year. All families are eligible for up to $7,500 back in subsidies so the maximum out of pocket cost would be $12,500. Double that if you have two children.
It’s not difficult to see how the cost of childcare acts as a disincentive for both parents to work.
If you’re inclined to ask, as many are, why that matters for anyone other than those parents, consider The Sydney Morning Herald’s economics editor Ross Gittins:
“From a narrowly economic perspective, childcare matters because any problems with it limit women’s participation in the paid workforce and economists have decided increasing the “participation rate” of women and older workers is a key to reducing the budgetary cost of an ageing population and to maintaining our rate of economic growth.
With girls now more highly educated than boys – and with the taxpayer having contributed significantly to funding that education – it’s been obvious for a few decades that it makes little sense to allow the conventions of a labour market designed for men to prevent women from participating fully in the workforce.”
The impact of the cost of childcare is not simply a matter for an individual family’s personal finances. It has broader ramifications for the economy that will only be exacerbated by the ageing population. Combined with the social benefits that a good quality early childhood education delivers, it is almost intriguing that childcare in Australia remains an uncracked nut.
It’s why the productivity commission report into childcare released earlier this month, had been so hotly anticipated.
One of the government’s stated objectives to the PC was to address affordability. Modelling released by Goodstart Early Learning, Australia’s largest not for profit provider of early learning and care, over the weekend indicates that – if implemented – the PC recommendations would actually increase the cost of childcare.
Goodstart Early Learning CEO Julia Davison said the proposed model would not deliver on the objective of improving affordability of childcare and supporting workforce participation because too many families would be worse off.
“The biggest change is that families would no longer receive a subsidy based on the real fee they pay, but would receive a percentage of a national ‘median benchmark fee’ which could be a lot lower than the fees they actually pay,” Davison said. “That means that families in child care centres with fees above the benchmark will, in many cases, be paying more than they are now, while families in centres with fees below the benchmark would probably be paying less. Centres in metropolitan areas, particularly inner metropolitan areas, have higher property costs and as a result must set higher fees.
The following families would be worse off if the PC recommendations were implemented:
– Families with a 3-5 year old in childcare for 3 days a week will be worse off if they are paying more than $90 a day in childcare.
– Families earning over $120,000 a year would be worse if paying more than $80 a day.
– Almost all families with two children in childcare for 3 days a week will be worse if they are paying fees of more than $80 a day.
Davidson says that the discrepancy between fees charged and the benchmark set by the government of between $72-$74 a day is problematic.
“The proposed model creates a geographic lottery where the childcare assistance a family receives from the Government would depend not just on their income, but where their centre is,” Davison said.
Around 37% of very low income families are in centres with fees above the median benchmark and would probably be worse off under the proposed model.
Davidson says without increasing the available funding for childcare, the PC’s ability to improve childcare affordability or workforce participation is hampered.
“A budget neutral reform means for every winner there inevitably has to be a loser and this modelling shows it’s not just high income families that will be worse off,” she said
“If the Government’s final families package is to significantly improve childcare affordability and support more women to enter the workforce, then additional Government investment into childcare will be needed.”
The Executive Director of advocacy group The Parenthood Jo Briskey agrees.
“The Productivity Commission claims that because low- to middle income families would see an increase in the percentage of subsidy they receive, they will be better off – but many won’t be so this is very misleading for Australian families,” Briskey said. “In reality, hundreds of thousands of families across all income levels, will see their out of-pocket costs for childcare skyrocket if the recommendation is accepted.”
This is largely because the fees don’t match the reality.
“Our issue with PC report is that the subsidies aren’t based on actual fees but on benchmarks,” Briskey told Women’s Agenda. “At the moment the benchmark is a median figure which means half of all Australians will be paying more than that.”
If the government wishes to make substantial improvements Briskey says it must increase the investment.
“The PS was asked to give recommendations based on the current funding envelope. It highlights the fact the government will need to increase their investment in childcare if we are going to see real changes.”
The minister for social services Scott Morrison is expected to ask his Cabinet colleagues for additional funding for childcare this week.