Childcare subsidy won’t deliver for children, families or taxpayers

The cost-of-living crisis continues to plague most Australian households. But a pernicious “cost-of-working crisis” is also enveloping many families.

There is no doubt the major source of financial pain is the cost of housing, with both mortgages and rent soaring. On Monday, The Centre for Population deemed the currently low fertility rate we’re seeing “here to stay” as housing prices – including rents – make starting a family increasingly unaffordable.

The prime minister says he is open to reforms that would make early childhood education free for low-income parents.Credit: AAP

Akin to a second mortgage for parents with children under six, it’s safe to say the cost of childcare may come in as a close second in deterring parents-to-be from starting a family.

And understandably so. Without the luxury of grandparents or relatives who are willing and able to step in, it’s an unavoidable cost. For parents of young children, going to work necessitates paying for formal early childhood education and care, the cost of which has skyrocketed. Broke if you work, broke if you don’t, work is the trap for these families.

To add insult to injury, the promise of more affordable daycare for these parents proved fleeting. Last year, the federal government made a historic $5 billion investment to boost the childcare subsidy and reduce costs to families by an average of 13 per cent.

A little over a year later, Australian Bureau of Statistics data shows out-of-pocket childcare costs have surged by 12 per cent – more than four times faster than the overall rate of inflation in the past 12 months.

This pattern is clear and predictable: when the government increases the subsidy rate, providers raise their fees. For-profit private providers raise fees by far greater rates. The maths isn’t complicated.

The money isn’t reaching families – it’s being absorbed into a system that’s fundamentally broken.

The damage doesn’t stop there. Rapidly rising childcare costs are a leading contributor to service cost inflation, keeping interest rates higher than they need to be. For families already struggling with housing and other rising costs, this creates a crushing double whammy. It’s no wonder young families are having fewer children than ever.

Amid today’s various crises – housing, cost of living, cost of working – young couples and families are forced to reconsider the pathway that, until recent years, they thought was clear-cut. Get married, buy a house, have a baby.

Why should they bear this responsibility of reconsideration instead of the systems designed to serve them?

As a society, we must fundamentally rethink our approach. To deliver true cost-of-living relief, support families, make early childhood education truly affordable, improve outcomes for children and boost our national productivity – we need to look beyond the failed subsidy model.

The childcare subsidy has proved itself time and time again adept at driving up out-of-pocket costs for families. It has proved inept at driving supply in regions or areas where few parents can afford to pay huge fees.

It’s done nothing to improve wages or professional support for educators.

It has done little to ensure children who would benefit the most from participating in early childhood education and care are attending. Insanity is defined as doing the same thing over and over and expecting a different result.

A stable roof over your family’s head and guaranteed education for your children shouldn’t be considered a pipe dream in this country, and yet increasingly, it is.

Australia’s success stories in healthcare, education and superannuation teach us a clear lesson: universal access requires direct government intervention in the market. Early childhood education and care is no different.

There are promising signs of change. The prime minister says he is open to reforms that would cap daily early learning fees for most families and make early childhood education free for low-income parents. This recognition that we need to look beyond the current subsidy model is welcome news for struggling families. The decision we make now will echo for generations.

We have the opportunity to build something transformational – an early childhood education system that works for all Australian families, regardless of where they live, what their parents earn or their background.

The prime minister has expressed hope that building a universal early learning system will be his legacy. The evidence before him is clear: the childcare subsidy won’t help realise this vision.

Georgie Dent is CEO of The Parenthood, a leading parenting advocacy organisation.

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