October 14th, 2020

Why cheaper childcare is good economics.


Labor went bold in its budget reply with a plan for cheaper childcare and a long-term vision for a universal system. While it is an important social policy, it is arguably an even more important economic reform.

Labor plans to increase the maximum Child Care Subsidy from 85 per cent to 90 per cent, slow down the rate at which the subsidy tapers off, and remove the annual cap. These changes would make childcare more affordable for almost every family using it.

Australia’s out-of-pocket childcare costs are high by international standards, and half of Australians with children under 5 say they struggle with the cost of childcare.

The government stresses that 70 per cent of families have out-of-pocket costs of less than $5 an hour per child for centre-based care. But $5 an hour translates to about $50 a day, $250 a week, or $13,000 a year for each child in full-time care. We estimate that under Labor’s plans more than half of families will pay less than $20 a day per child.

Read more: Danielle Wood and Kate Griffiths