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Child Care subsidies falling behind

Analysis by Early Childhood Australia (ECA), the national children’s peak body, shows that government subsidies for early childhood education and care have steadily fallen behind the cost of service delivery. As a result, subsidies cover an ever smaller proportion of daily fees and parents face increasing out-of-pocket expenses.

The Child Care Benefit in particular has substantially declined in value over the past few years and this will continue unless the structural problems are addressed.

“This is a major concern because quality early childhood education has many social and economic benefits, we don’t want it to be unaffordable. Children who experience quality early learning opportunities are more likely to thrive at school and have good social and emotional skills” said ECA CEO Samantha Page.

“The whole system needs an overhaul—it’s very complicated for families to understand and it’s having an increasing impact on parent’s ability to provide their children with an early education.”

“There are roughly 650,000 Australian families who claim both government subsidies. We estimate that should the current trend continue, these subsidies would cover 6–8 per cent less in 2016 than in 2009, and it will continue to decline.”

The Child Care Benefit is paid directly to a service, and currently covers a maximum $3.99 per hour of childcare for households earning up to $40,000. The subsidy tapers down to zero for families earning $150,000 per annum. The subsidy increases every year based on CPI, which falls well behind the average increase in early childhood education fees which is currently 7 per cent.

“We suspect that the substantial increase in early childhood fees is primarily due to annual wage increases, extended operating hours and higher fixed costs such as rent. These trends are common across service sectors and industries; early childhood education is not unique in this.”

“Whilst we would support higher indexation, the main issue is the current system which we have to address to ease the pressure on Australian families, particularly low and middle income earners.”

In its submission to the Productivity Commission Inquiry into Child Care and Early Learning, ECA will propose a new model of child care assistance which removes an expenditure cap and allows parents to claim a subsidy throughout the whole year.

“We can directly target cost-of-living pressures on young families by giving serious consideration to the complex subsidy arrangement currently in place. The Child Care Rebate and Child Care Benefit are poorly targeted and make things much more difficult than they need to be for families.”

“We need to make the process much easier and more accessible for families. This will go a long way to addressing affordability issues we have within the sector, and encourage more children to enroll in early childhood.”

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