Childcare fees grow faster than inflation, wages: ACCC report

Childcare fees rose at nearly double the rate of wages and well above inflation over the last four years and the number of centres charging above the daily cap has also doubled.

An interim report from the Australian Competition and Consumer Commission’s childcare inquiry found that in the four financial years between 2018 and 2022, fees for all types of early childhood education and care rose by between 20 and 32 per cent. Over the same period, inflation and wages grew by a little over 15 and 10 per cent respectively.

The ACCC has released an interim report into childcare costs.Credit: Kate Geraghty

The consumer watchdog’s findings come less than a week before the federal government’s long-promised cheaper childcare changes come into effect, expanding access to subsidies to help lower the costs for hundreds of thousands of families.

ACCC head Gina Cass-Gottlieb said there was no question the subsidies would help many families, particularly lower-income households, but it was unclear how much those using facilities that charged rates above the hourly cap would benefit.

“As soon as the charge is above the hourly cap, it becomes an amount that’s not able to be covered by the subsidy, and therefore will be an amount that families will bear out of their own pocket,” Cass-Gottlieb said.

In dollar terms, the national average fee for centre-based care, which is used by 97 per cent of families with children in childcare, have risen by about $21 a day since 2018.

After government subsidies, out-of-pocket costs have risen by 7 per cent over the past four years for families using centre-based care, 12 per cent for outside school hours care and 15.8 per cent for family care.

Cass-Gottlieb said while the pace of cost increases was not surprising, the increase in centres charging above the hourly rate cap was.

The report found that about one in five centre-based services and two in five family services charge above the hourly cap, double the number that charged above the cap in 2018.

The ACCC is due to complete its final report by the end of the year. The report will also help inform the Productivity Commission’s separate inquiry into childcare.

Acting Treasurer Katy Gallagher said making childcare cheaper was an important way to ease cost-of-living pressures on families and increase workforce participation.

“Ensuring operators do the right thing and treat families fairly is vital, which is why this inquiry is an important part of our plan to help families cope with rising cost-of-living pressures,” she said.

Opposition spokeswoman for early childhood education Angie Bell said the report’s findings were not a shock, as inflation figures showed childcare costs have increased by 6.5 per cent in the last eight months alone.

“Families need real cost of living relief and many of them have lost their new higher subsidies immediately to fee increases,” she said.

The ACCC interim report found that fees were higher on average in areas with more daycare centres, contrary to standard economic theory – and larger providers charged more, on average, than smaller facilities. The report said this could be due to a range of factors, such as having a greater density of providers in wealthier areas where families have the capacity to pay more.

Cass-Gottlieb said when it came to choosing a childcare facility, price was just one factor for families.

“Once they have decided what they can afford and how much they can afford, the choice they make in selecting a childcare centre is about location – is it no more than 15 minutes to drop the child off? Also, importantly, [it is] about quality, safety and the engagement of the educators with ... their children,” she said.

“In those circumstances, you have an interesting dynamic because you have centres who may be competing on factors other than price.”

Education Minister Jason Clare said it was crucial that families received the full benefit of the expanded subsidies, which come into effect on July 10.

“The ACCC is watching what’s happening right now to see whether providers across the country are playing by the rules,” he said.

“If they don’t then the ACCC will recommend what actions we need to take to ensure the full benefit of Cheaper Child Care is passed on to families.”

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