The changes involve adding A$1.7 billion to the A$10.3 billion a year already budgeted for child care. This spending will particularly benefit families with two or more children under five. It will also help couples with a combined income of more than A$189,390, by removing the subsidy cap that restricts them to a maximum of A$10,560 per child a year.
How will these changes affect you? In the short term, not at all. They won’t affect anyone until July 2022. After that some families will see great benefit.
But our analysis suggests the policy package won’t do much to improve the affordability of child care for many families on low to middle incomes. Nor will it do anything to address systemic problems.
Families’ lived experiences are important, as are average out-of-pocket fees. But without understanding what affordability means, it’s very difficult to pin down how much of an issue child-care affordability actually is.
Australia has tackled the question of affordability in relation to housing and energy costs. Housing stress for lower-income households, for example, is defined as a lower-income household spending a more than 30% of gross income on accommodation.
In Australia, we don’t have a comparable threshold for child-care affordability.
The US Department of Health and Human Services has set an “affordability threshold” for low to middle income families of 7% of take-home income. If they’re spending more than 7%, child care is considered “unaffordable”.
How these measures affect affordability
Increasing subsidies for families with two children under five in child care will make a big difference to families in that situation. But child care will remain unaffordable for many.
Our analysis suggests 41% of families with one child aged under five years will continue to spend more than 7% of their disposable income on child care.
- ^ big changes (www.smh.com.au)
- ^ removing the subsidy cap (www.servicesaustralia.gov.au)
- ^ government says (joshfrydenberg.com.au)
- ^ The child-care sector needs an overhaul, not more tinkering with subsidies and tax deductions (theconversation.com)
- ^ per-hour costs (www.pc.gov.au)
- ^ energy (www.aer.gov.au)
- ^ on accommodation (www.aihw.gov.au)
- ^ affordability threshold (www.brookings.edu)
- ^ help 250,000 families (ministers.treasury.gov.au)
- ^ 1 million families (www.dese.gov.au)
- ^ CC BY-SA (creativecommons.org)
- ^ who really need it most (joshfrydenberg.com.au)
- ^ tend to achieve higher quality ratings (www.acecqa.gov.au)
- ^ Families in eastern states pay around twice as much for preschool than the rest of Australia (theconversation.com)
- ^ for early childhood educators (theconversation.com)
- ^ crucially important (colab.telethonkids.org.au)
Authors: Kate Noble, Education Policy Fellow, Mitchell Institute, Victoria University