Budget 2025: $5bn worth of childcare funding bades in

Labor has baked in childcare measures, including scrapping the activity test for three days of care a week and investing $1bn to build centres in areas of need.

Prime Minister Anthony Albanese at a childcare centre in Brisbane. Picture: Dan Peled / NewsWire

Labor has used the budget to bake in signature childcare measures, including scrapping the activity test for three days of care a week and investing $1bn to build centres in areas of need.

As part of its vision towards building a universal early childhood education and care system, the government said it had used the budget to pump $5bn worth of investments into the sector.

This included $3.6bn in already-announced funding to lift the wages of childcare workers through the “worker retention payment”, which will benefit about 200,000 staff.

Despite Productivity Commission estimates that scrapping the activity test, even for just three days, would cost taxpayers billions a year, the budget reaffirmed Labor’s estimates that the measure would require just $427m over the forwards.

“In its first full financial year, the three-day guarantee is expected to result in 100,000 families being eligible for additional hours of subsidised early childhood education and care,” the budget papers say. And, in the face of criticism that the policy was a repeat of failed Rudd-era measures, Labor doubled down on its $1bn injection to establish the “building early education fund”. “This is expected to support 160 new or expanded early childhood education and care services in areas of need, including the outer suburbs and regional Australia, located on school sites where possible,” the budget papers say.

In his parliamentary address on budget night, Jim Chalmers said Labor believed “every child has the right to an early education to ensure that they don’t start school behind”.

“So from January 2026, we are replacing the child care subsidy activity test with a new three-day guarantee. This will make sure families are entitled to at least three days a week of subsidised early childhood education and care,” he said.

“We are also building more childcare centres in areas of need, investing $5bn to expand access across the country and lift the wages of early educators, and charting a path to universal early education and care, regardless of a child’s background or no matter where they live.”