Childcare subsidies: peak body to propose single payment up to 90%

Confusing government subsidies for childcare services should be rolled into a single payment covering up to 90% of costs for low-income families, a peak early-childhood organisation will tell the Productivity Commission.

The Australian government provides two main subsidies: the childcare benefit, which is means tested, and the childcare rebate, which is capped at $7,500 per child per year and is not means tested.

In a submission to a Productivity Commission inquiry into the childcare system, Early Childhood Australia will call for the two payments to be merged, arguing the current “complicated” arrangements make it difficult for parents to understand their entitlements.

The existing childcare benefit varies depending on household income and is indexed in line with the consumer price index. The benefit is available in full to households earning about $40,000 per year and tapers off to zero for families earning about $150,000.

ECA’s proposal to merge the two subsidies would cover 50% of childcare fees for households earning $150,000 a year, up from 39% available under the current subsidies, according to its figures.

The new payment would cover about 60% of the costs for households earning $115,000, up from 53% now, and 90% for households earning $40,000, up from 76% now.

ECA’s figures are based on gross childcare fees of $18,992 a year, or about $380 a week.

Increased subsidies are likely to face resistance from the Abbott government, which has stressed the nation’s budget challenges and asked the Productivity Commission to make recommendations that do not increase the overall cost of childcare assistance. But the idea of rolling the two subsidies into a single payment has support from a number of groups, including Mission Australia.

The chief executive of Early Childhood Australia, Samantha Page, said the current subsidy system was “very complicated” and led to a lot of confusion over what families paid for early childhood education.

“If we are going to do something about affordability issues within our sector then the commission needs to address the subsidy system as a matter of priority,” Page said.

“The model ECA proposes would streamline payments directly to services, thus reducing out-of-pocket expenses for families. The model is better for everyone, but particularly for low-income families whose children would benefit the most from a quality early childhood education.”

Addressing the budget costs of her organisation’s proposal, Page argued that the long-term economic outcomes from improving participation levels in early education would “far outweigh” the initial investment.

The Abbott government has asked the commission to conduct an inquiry into childcare and early childhood learning, looking at issues such as affordability, accessibility and flexibility in the context of the modern around-the-clock work environment. It will consider a push to provide greater government support for the use of nannies.

The government’s terms of reference stress the need for “appropriate and fiscally sustainable funding arrangements that better support flexible, affordable and accessible quality childcare and early childhood learning”.

The commission is due to release a draft report in July and provide its final recommendations to the government in October.

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Childcare subsidies: peak body to propose single payment up to 90%
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