Two years ago, it cost Jessica* $176 a day to send her daughter to childcare in Melbourne. From July, it’ll be $204.40 – a $26.40 jump.
Jessica is now reconsidering a second child. She’s accepted for the first five years of her daughter’s life, her and her partner will “just have to be broke”, dishing out more than $1,000 per week on fees.
“It’s like sending your child to private school,” she said.
Jessica said the government’s childcare subsidy, to come into effect from 10 July, had only led to daycare centres shooting up their rates. Choice wasn’t an option, with a two-year waiting list to get into nearby centres.
“It’s ridiculous, and it’s crippling families … they’ve gone ‘OK there’s these new subsidies coming into place, we’re just going to up our fees’,” she said.
“We were really looking forward to it and there’s little point now, it’s all eaten up. And with childcare spots so limited, parents have little option than to accept the increases.”
The federal government’s $5.4bn scheme will raise the maximum subsidy rate from 85% to 90% alongside a more generous income test, estimated to impact 1.2 million families across Australia.
Under the legislation, the family income limit is increasing from $356,756 to $530,000 per year. But experts have warned parents might end up paying higher costs as early learning centres seek to capitalise by bumping up their fees.
Labor estimates for a family earning $120,000 with one child in care, fees will be around $1,700 less annually.
For families on a combined income of $80,000 or less, the subsidy rate will lift to 90%, while the federal government has also increased the baseline number of hours of care Indigenous children are eligible for to 36 per fortnight.
Education and care consultant Lisa Bryant said the subsidy was “piecemeal” and came at a time the sector was still grappling with severe and worsening workforce shortages.
“We always knew they wouldn’t go far enough, like any increase to subsidies it means providers can increase fees, because the increase won’t be felt as much by the parents,” she said.
“What has happened here is a crescendo of things. The subsidy has gone up, but there’s also been a substantial wage increase of 5.75%.
“Good providers have gone ‘OK, let’s put up our fees by that much to cover wages’, whereas others have gone ‘yay, more money for us’.”
Bryant pointed to big private equity providers in millions of debt that had hiked annual fees by more than 11% annually to cover interest, and then some.
“Providers, real estate agents, property developers are looking at this as a good way of making money,” she said. “It’s not revolutionary to suggest the government should fund the services.”
The consumer watchdog is set to hand an interim report on its inquiry into childcare services to treasurer Jim Chalmers on Friday, with a final report to come in December.
Early childhood group Thrive By Five director Jay Weatherill said swifter action was needed to crack down on private providers using the subsidy to take fee increases beyond rising costs, citing common rises of between 6% and 8%.
“Providers who use this … reform to build more profit off the backs of educators and families shouldn’t be given a free pass to price gouge,” he said.
“Urgent action is required on transparency and accountability for any fee increases.”
On Thursday, Chalmers told ABC RN there were “existing caps in the system” when it came to prices but he was working closely with the Australian Competition and Consumer Commission on whether there were “other changes” that needed to be made.
“People will still be receiving substantial assistance with their early childhood education, and that’s a good thing,” he said, adding the alternative was “not providing any help at all”.
The same day, the prime minister told ABC Drive costs for “a whole lot of parents” would “certainly drop” while conceding “the truth is that for some, there will be an increase in July because they’re tied to inflation”.
“But the subsidies, if they hadn’t have been increased, that increase still would have occurred,” he said.
The education minister, Jason Clare, said the government was looking at whether Medicare-style universal childcare could be on the agenda in the future.
He told Sunrise on Friday the subsidy was “just a start”, pointing to a productivity commission under way looking into how affordability and access could be improved in the long term.
“We want to see what we can do here to make sure that we’ve got a universal early education system so all children get a great start in life,” he said.
*Not her real name
