Main Points
- Childcare costs in Australia are rising faster than anywhere else in the world.
- Australia ranks 26 out of 32 OECD countries in childcare costs.
- Gross fees in Australia increased by 7.3 percent from 2018 to 2022.
Childcare costs Australian parents more than in many other developed countries, according to a new report by the consumer watchdog. And even though the federal government contributes and in addition to child care fees compared to other countries, costs in Australia are rising faster than anywhere else in the world.
These are among the findings of the Australian Competition and Consumer Commission’s (ACCC) second interim report on childcare services released on Sunday.
The inquiry began in January and examined center-based daycare, family daycare, out-of-school-hours care, and in-home care. ACCC chair Gina Cass-Gottlieb said in a statement on Sunday.
“We find market forces under current policy settings are not providing access and affordability to all children and families across Australia.”
Childcare is less expensive in Australia than elsewhere
In 2022, an average-income Australian couple with two children will have more of their net household income going towards childcare costs than any other Organization for Economic Co-operation country and Development (OECD).
They spend 16 percent while the OECD average is 9 percent. That sees Australia ranked 26 out of 32 countries – and that’s despite the federal government contributing more to childcare fees than other developed countries, according to report. previously reported that as the change began to take effect.
Bills go up faster
The report found that gross fees – those before any rebates or subsidies – in Australia increased by 7.3 percent from 2018 to 2022 when adjusted for inflation. During that time, the OECD average fell to 7.1 percent.
The report theorizes that the decline in the OECD average may be due to other countries increasing supply-side subsidies – provided directly to providers – more than Australia.
“We have observed that many countries have decided to spend more on childcare to improve affordability and are moving towards greater regulation of childcare fees by offering low fees or free hours, supported by supply subsidies,” Cass-Gottlieb said.
Australians could also pay higher fees if childcare providers set prices to generate more profit, the report said – although it said it did not a country-by-country comparison of profit margins.
A problem with hourly rate caps
Australia has mechanisms in place to help with prices, but the system is complex. The childcare subsidy can be difficult for parents and guardians to accurately estimate their entitlements, the report found, meaning some struggle to accurately calculate out-of-pocket costs. for childcare.
The system is also calculated hourly, while childcare centers typically charge daily rates. This means that hourly rate caps are unlikely to be effective in guiding parents’ pricing decisions, the report says.
“Evidence suggests that center based daycare providers are tailoring session lengths for the households and demographic groups they serve rather than engaging in price competition,” it says.
“By maximizing the hours a household is subsidized and minimizing their out-of-pocket costs, providers seem to be able to maintain or increase their revenues and profits.”
Child care sharing
Market forces are driving greater child care supply in high socioeconomic areas and large cities, the report found.
But those in remote communities, and locations with a higher proportion of low-income households have fewer child care services and relatively no services at all.
“Our findings highlight that childcare is used by children and households in very different situations with different needs. A ‘one size fits all’ approach to achieve all the desired results is not possible,” said Cass-Gottlieb.
What recommendations have been made?
The report includes a number of draft recommendations. They propose reforms to the hourly rate cap, and for the government to closely monitor prices and have an intervention mechanism to put downward pressure on rates.
The government should also consider additional supply subsidies, and should consider targeted support for First Nations and underserved communities, the report said.
Where from here?
More than one million Australian households used childcare last year, and most households with children have accessed childcare at some point in their lives.
The ACCC published its first interim report on 5 July and released the second on Sunday. The recommendations are based on an analysis of the nature of child care markets, the child care subsidy, and the role price and quality play in the demand and supply of child care. throughout Australia. The report contains interim findings and draft recommendations for the government to review the child care policy.
The final report is due on December 31. Submissions can be made via the ACCC website until 29 October.
