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  • Writer's pictureFlow Australia

Childcare fees grew faster since rebates introduced

Childcare subsidies have lowered out-of-pocket expenses for families, but have resulted in fees growing faster than inflation and wages.

Childcare fees have grown faster than inflation and wages since rebates were introduced, which have been limited in placing downward pressure on prices.

The Australian Competition and Consumer Commission's final report from the childcare inquiry, released on Monday, found subsidies generally lowered out-of-pocket costs for families across income groups.

But fees across all services "have grown faster than inflation and wages since the introduction of the Child Care Subsidy".

The report says historically when subsidies increased, out-of-pocket expenses declined initially but then tended to go back to higher levels. 

This is due to subsequent fee hikes eroding some of the benefit for households over time.

The consumer watchdog found the design and implementation of the rebates had only "limited effectiveness" in placing downward pressure on fees and constraining the burden on taxpayers.

Since the Albanese government's measures were introduced, the average reduction in out-of-pocket expenses for centre-based day care was 11 per cent.

Households with the lowest incomes experienced the greatest drop in expenses, but still spent the largest proportion of their disposable income on childcare.

The report found the sector under current market settings was not delivering on accessibility and affordability for all children and households.

The childcare rebates started in July 2023, with subsidies helping more than one million families.

Labor placed childcare centres on notice, warning any lift in prices would be in the sights of the consumer watchdog.

The report made eight recommendations, including for consideration to changes to the Child Care Subsidy and hourly rate cap, to address intended consequences.

Education Minister Jason Clare said the report revealed more work was needed to make childcare more accessible. 

"The government will consider these along with the recommendations of the Productivity Commission which is due to report in a few months," he said.

Early Childhood Education Minister Anne Aly said alternative approaches for vulnerable groups would be considered.

"Our Cheaper Child Care reforms are delivering for families, reducing out-of-pocket costs and ensuring more children can access the transformative benefits of early learning," she said.

An interim report found childcare fees rose by 22.8 per cent between 2018 and 2022, compared to an average of 6.2 per cent for other developed nations.

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