Labor’s key childcare subsidy policy is counteracted by rising childcare costs, parents say

Skyrocketing childcare costs are eating into the expected savings from the childcare subsidy changes brought into effect by Labor, with parents reporting increases of almost $20 a day for care.

Sarah Novelli and her daughter Adriana at their home in Kareela in the Sutherland Shire. Childcare costs have sky rocketed recently with increases practically absorbing any rebates granted in the recent budget. John Feder/The Australian.

Skyrocketing childcare costs are eating into expected savings from Labor’s landmark subsidies and jeopardising one of Anthony ­Albanese’s key measures to ease cost-of-living pressures, with parents reporting increases of up to $20 a day for care.

The government passed laws for cheaper childcare last year, which Mr Albanese promised would leave more than one million families better off.

Coming into effect from July 1, the subsidy will lift from 85 per cent to 90 per cent for families with a combined income of less than $80,000, which drops by 1 per cent for each additional $5000 of annual income up until hitting zero at a combined income of $530,000.

However, parents across the country have received letters from childcare centres informing them fees would rise from next month due to the rising cost of energy, wages and food.

Parents sending children to a YMCA in Canberra were informed this month that daily fees would rise from about $145 to $155 a day, while those with children at Explorers Early Learning in ­Armadale, Melbourne, were told fees would increase $13 to $188 a day.

Both providers cited the significant challenges, such as the rise in cost for energy and wages, as ­necessitating the change.

Data from the Australian ­Bureau of Statistics shows that in the past six months, childcare fees have risen an average 6.5 per cent.

Parenthood chief executive Georgie Dent said while many parents would benefit from the “welcome” subsidy increase, some were reporting it would have little to no difference because it coincided with rising fees.

“There’s no way around the fact that these changes will benefit a significant number of families. But for some families, we are aware that the affordability relief may be eroded by fee increases,” she said.

Sydney mother Sarah Novelli said the cost of childcare for her two-year-old daughter, before any subsidy was applied, had gone from $135 to $156 a day. Without the increased fees, Ms Novelli ­expected to save $40 a week following Labor’s boost to the childcare subsidy, but said that saving was now down to just $4.

“The subsidy increase is very welcomed, but still doesn’t go far enough to have any material ­impact on families,” she said.

“Most parents agree with and understand why childcare centres need to increase their fees, but those fee increases do mean the benefits of the subsidy is not fully passed onto families who were ­expecting financial relief.”

Ms Novelli, who’s husband is a tradesman while she works in human resources, said the recent challenges to childcare costs meant that she had put having a second child on hold.

Opposition Early Childhood Education spokeswoman Angie Bell said she was worried about the increase to the subsidy having little affect on families, given the rising fees.

“I am concerned that while the higher childcare subsidy is coming into effect from next month, much of it will be eaten up by ­higher fees, leaving families with more out of pocket costs,” she said. ­ Andrew Walkington, a father of three, also reported a $30-a-day increase of fees for his children’s care, which counteracted the savings he hoped to see following the subsidy.

“We were thinking with this subsidy coming in that we were going to get some reprieve from that and were really looking forward to this great thing the government is doing and then we just got this email from our childcare saying that the rates will be increasing by about $10 per day, per child,” he said.

“So that’s $30 per day and $150 per week. We’ve obviously got inflation and the cost of living – everything’s going up but, yeah, the saving is not what we thought it was going to be.”

Mr Walkington, whose children are aged between two and 5½ , said that of the $9-a-day increase per child, the family would cover $8.30 because of the hourly rate cap and the fact the subsidy only covered 100 hours of care a fortnight.

Like many parents, Mr Walkington must pay for a full 12 hours of care for each day his children are at their childcare centre, ­regardless if they stayed for less.

Thrive By Five director and former South Australian premier Jay Weatherill said the “overwhelming majority of families” should see a benefit from the subsidy from July, but said there would be some providers “charging over the odds”.

He said the subsidy was welcome as a “first step” to reforming the sector but more root-and-branch reform was needed to make the system work best for families.

Early Childhood Education Minister Anne Aly said the government had asked the Australian Competition & Consumer Commission to investigate the fee increases, and it would report back by the end of the year.

“While there are already hourly rate caps in place, putting downward pressure on fees, we’ve also tasked the ACCC with investigating the many factors that drive cost. This work will help us build and maintain an affordable, high-quality early childhood education system,” she said.

As part of its examination of childcare costs, the ACCC found in a survey of more than 4000 parents that “almost all families said their fees have increased in the past twelve months”.