Families to cash in on $1.7bn childcare boost

Working families will save up to $162 a week in childcare costs from Monday as the Morrison government boosts subsidies, with a federal election looming.

Simon Rawnsley, baby Una, Maeve, 3, and Jessica O’Neill will benefit from the federal government’s childcare boost. Picture: Morgan Sette

Working families will save up to $162 a week in childcare costs from Monday as the Morrison government boosts subsidies in a hip-pocket pitch to voters as the federal election looms.

The change slashes daycare costs for 250,000 families, which on average will be $2260 a year better off.

Taxpayers will spend $1.7bn to boost the top childcare subsidy from 85 to 95 per cent of fees for second and subsequent children in daycare.

Savings for two children in full-time daycare will range from $54 a week for families earning $40,000 a year in combined gross income, to $162 a week for those earning $180,000 a year.

Parents with one child in daycare will not benefit from the higher childcare subsidy.

As soaring childcare costs chew into household budgets, the government has boosted subsidies four months earlier than planned to ensure voting parents pocket the savings in time for an election to be held by May 21.

Acting Education Minister Stuart Robert said the higher subsidies follow the recent abolition of a $10,655 cap on subsidies for families earning more than $190,015 a year.

“That means more money in their pocket each week,’’ he said.

“The average hourly out-of-pocket costs for children using centre-based daycare are 18 per cent lower than in 2018.’’

Adelaide mother of two Jessie O’Neill welcomed the higher subsidy for baby Una, who will start daycare later this year.

Out-of-pocket fees already total $130 a week to send three-year-old sister Maeve to daycare three days a week – 13 per cent of the household budget.

Ms O’Neill, who works three days a week as a university student employment co-ordinator, said the fee relief would save her cutting her work hours even more. “If this change wasn’t coming in, it wouldn’t have been worth working as many hours as I do,’’ she said.

“Thank god we won’t have to pay twice as much as we pay now.

“We’re not in a position where we have to choose between childcare and paying for groceries, but it should be affordable for everybody.’’

Government Services Minister Linda Reynolds said the extra funds would flow automatically to parents.

Despite the extra fee relief, rising childcare fees are likely to soak up some of the savings as daycare centres pass on wage rises, rising rents and Covid-19 compliance costs.

Australian Bureau of Statistics data reveals family childcare expenses rose at least 8 per cent in Sydney, Canberra and Perth in 2021. Spending on childcare rose 6.5 per cent in Brisbane and 3.3 per cent in Melbourne.

Families are bracing for more fee increases this year as G8 Education, the nation’s biggest for-profit childcare chain, imposes an average 6 per cent fee increase across 450 centres.

The Parenthood advocacy group for families demanded the federal government provide more financial relief in next month’s budget. “Australian parents already pay some of the most ­expensive out-of-pocket costs for childcare in the world and these costs continue to soar for many families,’’ The Parenthood executive director Georgie Dent said on Sunday. “The burden of fees forces too many working families into terrible choices, including discouraging women from going back to work and stopping young children from attending early learning programs vital for their development.’’

Thrive by Five chief executive Jay Weatherill, a former Labor premier of South Australia, called for urgent reform to early childhood education and care. “Every child, regardless of their postcode or family circumstances, should have access to at least three days of quality, affordable early learning and care, starting as soon as parents want it,’’ he said.

“Fixing the early learning system is the type of reform that will define this generation of political leaders, contribute to greater gender equity and set Australia on a trajectory of economic growth unmatched in our history.’’

Modelling by the Mitchell Institute at Victoria University has found that 700,000 families would be no better off despite the fee relief starting today.

A family with two parents earning the average wage is paying 6.2 per cent of after-tax earnings on childcare, the Productivity Commission reported last month.

Single parents earning $75,000 a year spend 4 per cent of their take-home pay on out-of-pocket costs for daycare.

Daycare cost and quality will be a hotly contested election issue, as Labor campaigns on a slogan of “cheaper childcare’’. It has also pledged a Productivity Commission review “with the aim of implementing a universal 90 per cent subsidy for all families’’.