More than a third of Australian families cannot afford childcare

By Melissa Coade

Thursday July 1, 2021

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One in three families are spending more on childcare than on groceries. (Greg Brave/Adobe)

About 39% of Australian families cannot afford the childcare services they use, according to modelling from Victoria University.

A new report from Victoria University’s Mitchell Institute has earmarked that a forthcoming federal change to childcare subsidies around the country will only slightly improve affordability for families. 

Using a benchmark of no more than 7% of disposable income spent on childcare to determine affordability, the Mitchell Institute researchers used modelling to determine that the situation of only a few families of the current 396,000 who cannot currently afford childcare will change for the better. 

One in three families are presently spending more on childcare than they do groceries, and for 85% of families childcare fees exceed their spending on utility bills.

Report co-author Dr Peter Hurley said the research confirmed what most families already knew — that childcare makes a massive dent in household budgets. He also warned that the economic consequences of COVID-19 meant that a growing number of households would find the costs of childcare to be too great.

“With COVID-19 increasing levels of housing and employment stress for many families, childcare is likely to be a clear big ticket item to cut to make ends meet,” Hurley said. 

The government’s childcare subsidy changes will come into effect in July 2022 and will make childcare more affordable for one in four families who use childcare.

But according to the Counting the cost to families: Assessing childcare affordability in Australia report, this policy will leave another 700,000 families (mostly with low incomes) in no better a situation.

According to study, the government subsidy will improve the affordability of childcare services for only 5% of families — meaning that 34% of families will continue to struggle to pay fees for childcare.

Hurley explained that high-income families were both more likely to afford current childcare, and to benefit most from next year’s removal of the subsidy cap.

“The debate on childcare affordability has been bogged down in anecdotal evidence and statistics about the amount of subsidies, rather than actual affordability for families,” Hurley said.

“Despite attracting the greatest subsidies, childcare remains unaffordable for more than two in five low and middle income families.”

Although there is an abundance of evidence which shows that good quality child care delivers benefits to child development, families, society and the economy, Dr Hurley added that high fees for childcare services in Australia would lead to an $11 billion shortfall each year. 

“Our research has shown that sending children to childcare is more expensive for families than sending their children to a private primary school,” Hurley said. 

He also pointed to the fact that unaffordable childcare normally resulted in mothers – who generally earn less than fathers – opting not to go back to work, or working fewer hours than they would like. 

A 2021 Grattan Institute survey of 100,000 families found that childcare costs were the main reason for not being in employment. 

“Many families are not using early childhood education and care services, meaning children don’t receive the developmental benefits of early learning,” Hurley said.


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