Why you can’t afford childcare

Eugenie Joseph

31 August 2018 | Ideas@TheCentre

Childcare is becoming less affordable in Australia, despite billions of dollars in public subsidies — and it is largely due to increasingly stringent regulation.

The regulation of childcare under the National Quality Framework has had a significant impact on fees and affordability for parents, while the alleged benefits are contestable and not based on firm evidence.

In particular, minimum staff-to-child ratios and qualification rules have required childcare centres to employ more staff with higher qualifications — which add to their labour costs.  These costs, in turn, are being passed on to parents in the form of higher fees.

Childcare fees have been growing well above inflation in recent years, while parents’ out-of-pocket costs have increased by nearly 50% in real terms since 2011 — despite little change in the hours of childcare used.

However, rising fees and out-of-pocket costs should not surprise anybody.

The Council of Australian Governments (COAG) estimated that the staff ratios and qualification rules would add over $1.2 billion to the costs of providing long day care — the most common type of childcare — over 10 years. It also predicted these costs would be passed on to parents.

Based on these estimates, fees for long day care were 11% higher in 2017 than they otherwise would have been, due to staff ratios and qualification rules.

This reflects a bizarre inconsistency in childcare policy. Using one hand, governments are trying to reduce childcare costs with subsidies. With the other hand, governments are driving up the costs of childcare through regulation.

And the cost of childcare subsidies to the federal Budget is expected to be $8 billion this year and reach $9.5 billion within four years. When combined with continued growth in childcare fees, this is not sustainable in the long-term.

Federal and state governments should examine the case for reducing or simplifying the staffing and qualification requirements under the National Quality Framework.

If Australians want affordable childcare, a more flexible approach to regulation is clearly needed.

Eugenie Joseph is the author of the research report, Why childcare is not affordable, published this week.

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