Quality, affordable childcare vital

Despite high debt, and demands for extra spending on defence, aged care and the National Disability Insurance Scheme, the Albanese government will keep its election promise to increase childcare subsidies for families earning up to $530,000 a year. The policy, projected to cost taxpayers $5.4bn a year, was Labor’s biggest election commitment. The means test is too generous for high-income earners. Critics, including taxpayers who care for their children at home, will regard it as middle-class or high-income welfare.

While designed to appeal to voters, it will provide some productivity gains. In a 2014 report to then treasurer Joe Hockey, the Productivity Commission noted two principal benefits of subsidised childcare and early childhood learning. First, it encouraged additional workforce participation and provided an incentive for second income earners in families, mainly women, to increase their paid work from part time to full time. Eight years on, with skills shortages a problem for businesses, the economy and revenue, this is an important consideration for the nation’s living standards. It is problematic, as Education Minister Jason Clare says, that many people want to work more, but if they did the extra pay “would be gobbled up by the childcare bill. It means it’s not worth it.” Second, the commission said in 2014 childcare and early learning provided important developmental benefits for many children, especially those from disadvantaged backgrounds. As the commission also acknowledged, “many parents prefer parental-only care, at home, for their children, particularly when they are very young”.

Next week, Mr Clare will introduce a bill to increase childcare subsidies from July next year. For families with a combined income of up to $75,000, the subsidy will increase from 83 per cent to 90 per cent. From there, support tapers off. The subsidy for families earning $200,000 will rise from 50 per cent to 66 per cent. Those earning $400,000 will go from no taxpayer support to a 27 per cent subsidy.

Childcare fees have risen by 41 per cent in the past eight years. There is a real risk that the generous increase in taxpayer-funded subsidies could be swallowed by fee rises or profiteering. The quality of childcare is vital. The year-long inquiry into the sector by the consumer watchdog, the Australian Competition & Consumer Commission, starting in January, will play a key role in identifying why fees are rising. The ACCC’s advice on how to contain costs will matter to consumers, all taxpayers and the budget.