Why parents face higher costs despite government wage subsidies
Parents will pay more for childcare after the government raised pay caps under a $3.6 billion deal to continue supporting workers’ wages.
The government averted a national strike, pay cuts and wage increases for workers by expanding workers’ wage funding in a move widely welcomed by the industry.
But after removing the maximum amount centers can increase fees, parents still face increased costs, adding hundreds of dollars to the annual costs of most working families.
Centers that received the taxpayer-funded subsidy that gave child care workers 15 percent wage increases were initially required to cap wage increases at 4.2 to 4.4 percent under a funding commitment that expires this year.
Earlier this month the government agreed to extend the wage subsidy for another two years, but the wage cap was raised to 5.8 percent. The cap is calculated based on the expected costs of providing care, which are expected to rise following a national crackdown on safety standards following multiple revelations of sexual abuse of children by child care workers.
Lawyers warn that many parents’ budgets are at breaking point, despite the government guaranteeing three days of childcare support for each child. Child care is one of the fastest-growing contributions to the budget, with the subsidy costing almost $16 billion a year.
Latest data from the Australian Bureau of Statistics revealed childcare costs rose 9.4 per cent last year; This is more than double the headline inflation rate.
While childcare costs vary across Australia, access to subsidies depends on family income. Based on average wages in NSW, a family earning $120,000 a year and caring for a child three days a week could expect to pay up to $211 extra a year, according to the government’s subsidy calculator. For a family earning $270,000, wages can go up to $497 annually.
Georgie Dent, executive director of advocacy group The Parenthood, said the childcare subsidy model had reached a difficult point where parents could not afford to pay more for childcare while providers had no choice but to keep raising fees.
“We have been campaigning for a different funding model for a long time,” Dent said. “Taxpayers are spending $16 billion, out-of-pocket expenses remain prohibitive for many already severely strapped households, access is patchy depending on your zip code, and quality is not uniform.”
Suppliers, especially high-quality nonprofits that are investing more in their workforce, are under pressure as the cost of doing business and security compliance demands rise simultaneously, he said.
“It’s a delicate balance because getting this right means wages going up, which is hard on families… Parents can’t afford another increase.”
Dent said a potential 5.8 percent wage increase for child care workers would be preferable to parents fully funding a 15 percent wage increase.
Opposition childcare spokesman Matt O’Sullivan said Labor had failed to cut the cost of childcare as promised.
“Families pay 27 percent more [since Labor took office]. They’ve raised the wage cap, costs are still rising, and there’s no end in sight. “This is another Labor lie,” the senator said.
Education Minister Jason Clare said wages rose by 49 per cent under the previous Coalition government and the wage cap was intended to keep costs down.
“Fees in centers that received the payment increased by half compared to centers that did not,” he said.
Brittany Busch is the federal politics correspondent for The Age and the Sydney Morning Herald.Connect via email.
