‘Outrageous’: Aussies blast soaring childcare fees after bombshell ACCC report

A poll has revealed what Australians think needs to be done to help families hit with rising childcare costs. See how the fees compare and have your say.

A majority of Australians believe childcare fees should be capped as a bombshell new report reveals parents are paying nearly 80 per cent more than families overseas.

A News Corp Australia poll revealed 76 per cent of those who voted think the government should set a daily cap on childcare fees to help struggling families cope with soaring costs.

One commenter described childcare costs as “totally outrageous” and the cost of living as “ridiculous”.

Another commented on the success of Canada’s federally funded “$10 a day” childcare system, which was introduced by the Trudeau government in 2021 and has been life-changing for parents.

It comes as Australia’s consumer watchdog called for the government to step in to set up free services in a major and urgently-needed overhaul of the troubled sector.

The report calls for drastic reform options including having the government step in to provide free childcare care in lower income areas where there are fewer centres.

The Australian Competition and Consumer Commission (ACCC) found gross childcare fees rose by 20.6 per cent in the five years to July 2022 — more than twice the average growth in other OECD countries.

It also called out large childcare services creaming off profits as high as 18 per cent.

The ACCC said it was impossible for parents to compare prices and, in a devastating analysis, concluded “market forces alone have failed to meet community expectations” in providing childcare where it is needed.

There were fewer childcare services in less-advantaged areas compared to well off suburbs.

Services in low income areas, it found, were of a poorer quality and people on low incomes were paying a higher proportion of their income on out-of-pocket expenses than wealthier families.

The report calls for drastic reform options including having the government step in to provide free childcare care in lower income areas where there are fewer centres.

Scrapping the activity test, which makes it hard for families with low working hours to access care, is another option.

The government should also consider providing a certain number of free childcare hours to all families each year, the report said.

And it wants the government to consider ways of capping childcare fee rises by setting a daily fee cap or requiring centres to provide information on fees on a per hour basis so parents can better compare prices at different providers.

“We think there should be consideration of a price monitoring role by government supported by a credible threat of intervention in order to place a downward pressure on fees,” said ACCC Chair Gina Cass-Gottlieb.

“In other OECD countries a certain minimum number of free hours are either provided universally, or to particular cohorts.”

ACCC chair Gina Cass-Gottlieb says government should consider taking on a price monitoring role with powers to intervene. Picture: Sam Ruttyn

One option would be to “look to public provision in undeserved areas in particular,” she said.

More than 1.2 million families use childcare and the taxpayer spends $12.7 billion a year subsidising the sector.

Despite our government covering a higher proportion of childcare fees through subsidies than other countries, childcare in Australia is less affordable compared to most other OECD countries, the report found.

In 2022 an Australian couple on average wages with two children spent 16 per cent of their net income on net childcare costs, compared to the OECD average of 9 per cent.

With government subsidies guaranteeing 70-80 per cent of cost, childcare is seen as a sure bet investment and it is increasingly being taken over by large offshore private equity firms.

Research by the United Workers Union in 2021 found four of the five biggest for-profit childcare providers were owned by offshore private equity firms.

How Australia's childcare fees compare to other OECD countries. Picture: Supplied

The ACCC said “there has been significant interest in buying and selling childcare companies in recent years,’ with some groups being sold for $450-$650 million.

The ACCC notes the operation of franchises like Koolkidz, Mindchamps and Explore and Develop in childcare could also be pushing up costs because services have to pay up to 8-9 per cent of their earnings in franchise fees.

Benjamin Balk who set up KindiCare which helps parents find childcare that offers quality good value said centres were battling massive rent rises, higher costs for food and wages in an inflationary environment.

“We saw over the last 12 months and even at the half year, fee increases were between seven and 18 per cent and that’s at a time where the hourly subsidy rate only went up by 7.8 per cent,” he said.

KindiCare founder Benjamin Balk with his family. Picture: Kirsty Jauncey Photography.

A critical issue in solving problems in the industry was to find a way to provide higher wages to solve the workforce shortage, he said.

Sarah Gardner Deputy Director Early Education at the United Workers Union which is seeking a 25 per cent pay rise for childcare educators said the root cause of unmet demand for childcare was low wages.

“We’ve just not being able to find enough staff to provide the service and the education that children need and nothing else can be fixed until that most urgent issue is fixed,” she said.

Families, childcare centres and other interested parties are being encouraged to comment on the recommendations before the final report is handed to Treasurer Jim Chalmers in December.

Kelly Roman and her two kids Olivia, 6, and Louie, 3 are affected by the cost of childcare. Picture: David Swift

CHARGED A FULL DAY FOR A FEW HOURS

Kelly Roman spends an “insane” $480 a week on childcare for her three year old son Louie.

The 37-year-old mum from Maroubra in Sydney said she had enrolled her son in care so he could get used to being with other children ahead of starting school.

Even though she only needed a few hours care each day, centres charged for a full day whether parents required that many hours or not.

“It’s insane. We’re paying somewhere around $160 a day. I feel like it just keeps going up and we are $250 a week out of pocket after government subsidies,” she said.

Her friend in Cronulla was paying even more for childcare — $200 a day.

“Even though we probably don’t want to leave our children there all day long you’re spending that much money you want to make it worthwhile,” she said.

Ms Roman has just returned to work after taking time off to care for her two young children and said she had to switch from her previous career in hospitality.

“To earn what I pay in childcare. I would have to do the nights and the weekend work and rely on some sort of tips, it wasn’t doable,” she said.

The substantial rise in government subsidies for childcare that took effect in July was almost totally swallowed up by childcare fee rises two months later, she said.

Originally published as ‘Outrageous’: Aussies blast soaring childcare fees after bombshell ACCC report