Key facts
- Prime Minister Anthony Albanese wants universal childcare to be his political legacy.
- Childcare fees for one family rose from $175 a week for four days to $536 a week for five days.
- Australia needs more births, with universal childcare seen as key to addressing declining birth rates.
- Deloitte is preparing a report on the cost of delivering childcare services nationwide.
- The government has provided $17.3 million in grants for new childcare centers in outer metropolitan and regional areas.
- Childcare fees jumped 7.3% in the 12 months to August, more than twice the inflation rate.
Prime Minister Anthony Albanese is prioritizing universal childcare as a cornerstone of his political legacy, aiming to make it as accessible as public schooling. However, the initiative faces considerable hurdles, including determining the funding model and addressing rising costs and safety concerns within the sector.
For families like Rachel Hill's in Sydney, the cost of childcare is a significant burden. Hill recently increased her work hours to full-time, only to find that her additional income was entirely consumed by childcare fees, which rose from $175 a week for four days to $536 a week for five days. This financial pressure has made the prospect of having a third child unfeasible for her family.
The Australian government is exploring various models for universal childcare, drawing inspiration from international examples like Canada's capped $10 a day care or Estonia's fee caps. While the exact approach remains undecided, it is likely to be means-tested. Two consulting firms, Deloitte and KPMG, are assessing the challenges. Deloitte is tasked with outlining the cost of delivering childcare services across metropolitan, suburban, regional, and remote areas, and has had to compel service providers to submit financial data due to low volunteer turnout. KPMG has provided a report on the business case for government ownership and leasing of childcare centers, linked to a $1 billion building early education fund.
This fund has already seen its first grant round, with $17.3 million distributed to three not-for-profit providers to establish four centers in underserved areas. The government's strategy appears to favor an increase in not-for-profit providers, as they currently constitute only 30% of the sector, which is predominantly privately run. This shift is already underway, with some for-profit providers facing financial difficulties, such as Edge Early Learning going into administration, while not-for-profit Goodstart Early Learning is considering taking over some of its centers. However, not-for-profit providers also operate on thin margins.
Reforms will also need to address the current childcare subsidy system. While the government has increased subsidies since 2022, leading to savings for some families, childcare fees have continued to rise rapidly, outpacing inflation. The Productivity Commission has proposed options, including free childcare for families earning under $90,000, with a progressive reduction in subsidies for higher earners. The Greens have also commissioned modeling for 50 hours of free childcare per week, which could cost $127 billion over a decade.