Federal Budget Child Care Subsidy Changes Do Not Fix Systemic Problems

The Australian government has announced big changes to its child care subsidy ahead of the May 11 federal budget.

The changes are to add $ 1.7 billion over three years to the money already allocated for child care (now $ 10.3 billion per year). These expenses will particularly benefit families with two or more children under the age of five. It will also help couples with a combined income over $ 189,390, by removing the grant cap that limits them to a maximum of $ 10,560 per child per year.

The government says the changes “are deliberately targeting low and middle income earners, with about half of families expected to have family incomes below $ 130,000.”

How will these changes affect you? In the short term, not at all. They will not affect anyone until July 2022. After that, some families will see great benefits.

But our analysis suggests that the package will do little to improve the accessibility of child care for many low- and middle-income families. It will also do nothing to resolve the systemic problems.

Changes to the grant will not affect anyone until July 2022.(

Unsplash: Rashid Sadykov


What is affordable?

Much of the discussion about the affordability of child care centers on hourly costs and anecdotal evidence based on the circumstances of individual families.

The experiences of families matter, as do the average costs. But without understanding what affordability means, it is very difficult to determine how much of a problem affordability is in child care.

Australia has tackled the issue of affordability versus housing and energy costs. Housing stress among low-income households, for example, is defined as a low-income household that spends more than 30% of its gross income on housing.

In Australia, we do not have a comparable threshold for the affordability of child care.

The US Department of Health and Human Services has set an “affordability threshold” for low- and middle-income families of 7% of net income. If they spend more than 7 percent, child care is considered “unaffordable”.

Karen Stern and her son Zachary stack colorful children's blocks
Without understanding what affordability means, it is difficult to determine to what extent the affordability of child care is an issue.(

ABC News: Marty McCarthy


How these measures affect affordability

The increased subsidies for families with two children under the age of five in daycare will make a big difference to families in this situation. But child care will remain unaffordable for many.

The government said the program would help 250,000 families. However, nearly a million families use child care services, so the majority are unlikely to benefit from these changes.

Our analysis suggests that 41 percent of families with a child under five will continue to spend more than 7 percent of their disposable income on child care.

This includes half of all households with annual disposable income between $ 100,001 and $ 125,000.

For example, a family with a combined gross annual income of $ 102,000 will still have to pay full-time child care costs of about $ 11,000 per year.

So while the measures aim to make child care more affordable for families “who really need it the most,” our analysis suggests that child care will remain unaffordable for hundreds of thousands of Australian families.

It also won’t make childcare funding and subsidies any less complicated, despite recent reforms to simplify the system.

What about preschool?

One question that is not yet clear is how the changes will interact with other parts of the early childhood education and care system.

A child who goes to preschool, for example, is entitled to a different set of grants. Significant increases in childcare subsidies could see families withdrawing their children from dedicated preschools and instead using cheaper childcare services.

Since preschools tend to get higher quality ratings and are important in supporting children’s transition to school, this would be a very perverse outcome.

A woman in a purple sweater is holding a picture book with children in front of her
A child who goes to preschool is eligible for a different set of grants(

PAA: Peter Rae


What still has to happen?

The emphasis on economic growth and the participation of women in the labor market also comes at the expense of a greater focus on providing quality service to children and a decent career path for educators. from early childhood.

These changes are intended to increase the demand for child care services. However, scaling the industry to meet this demand will present the same challenges associated with scaling any service. There are risks of compromised quality – which is critically important in an area that so intimately affects the health, well-being and development of children.

So while these changes are welcomed by many, the more complex issues remain, with no real indication at this time of a plan to address them.

Editor’s Note: This article has been amended to clarify that the $ 1.7 billion increase in funding for child care subsidies will be phased over three years, not every year.

Kate Noble is a Fellow in Education Policy and Peter Hurley Fellow in Politics, both at the Mitchell Institute at Victoria University. Noble and Hurley received funding from the Minderoo Foundation. This piece first appeared on The conversation.

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