The Australian Competition and Consumer Commission (ACCC) has called on the government to closely monitor providers’ costs,profits and outcomes,with the threat of regulatory intervention in a bid to reduce fees.
Parents might be paying less now thanks to a new government subsidy but the ACCC says over time fees will simply increase.Supplied
It also urged the Commonwealth to take on a market “stewardship” role to improve the availability of childcare in low socio-economic areas where providers believe they are unlikely to turn a profit.
“The ACCC recommends this include a stronger role for government to monitor providers’ price,profits,costs and outcomes,supported by a credible threat of intervention,to put pressure on the market to avoid exceptionally high fees,” the report said.
The Albanese government’s reform changes reduced out-of-pocket expense for centre-based day care by 11 per cent on average between June and September 2023. But the ACCC report said those affordability benefits were unlikely to endure.
“Historically,when subsidies have been increased,out-of-pocket expenses decline initially,but then revert to higher levels. This is because subsequent fee increases erode some of the intended benefit for households over time,” it said.
Parents might have saved some cash in 2023 thanks to the childcare subsidy increase,but the ACCC report detailed how one provider calculated it increased profits by $11 million last year thanks to the change.
Another large operator sent its staff lists of parents who stood to benefit most,so they could have “targeted conversations” with them. It allowed them to sell additional days,build brand loyalty from any out-of-pocket savings and supported affordability for Indigenous households.
About 25 per cent of childcare providers structured as companies either failed to turn a profit or made almost no profit,the report said. Labour costs account for 69 per cent of the total costs for centre-based day care services and have increased rapidly over the past five years.
The Starting Blocks website,designed to bolster fee transparency,had also failed to assist in reducing fees for parents. The report found that was in part because it lacked key information to make it useful and was often out of date.
ACCC chair Gina Cass-Gottlieb.Dominic Lorrimer
ACCC chair Gina Cass-Gottlieb toldThe Sydney Morning HeraldandThe Agethat government regulatory intervention as proposed in the report could involve “naming and shaming” of childcare centres charging excessive fees.
“Where they are consistently an outlier they[would] need to substantiate how their costs have changed,which is why their prices have had the level of increase that have,” she said.
The report also outlined how lower socio-economic areas lacked affordable childcare centres because private providers do not believe they could turn a profit in such places.
To combat that,it said,the government could take on a role of “market steward” to identify under-served or unserved cohorts of childcare users and consider appropriate interventions,including subsidies direct to business to make them viable.
Cass-Gottlieb said low-income and Indigenous communities were not well served by current operations.
“We can see for instance,with low-income earners,that the level of enrolment of children aged zero to five in 2021 was at 54 per cent,whereas for higher income groups,it was 76 per cent,” she said.
The ACCC said direct price controls or direct price interventions may be necessary but only in specific situations.
Australian Childcare Alliance’s chief executive Paul Mondo said the cost of delivering the services has increased above inflation over the past five years. “The inquiry has found that structural reasons have driven up costs across the whole sector,specifically wage operating costs,and that there is no evidence of excessive profits across the sector,” he said.
Advocacy group The Parenthood’s chief executive Georgie Dent welcomed the recommendation to axe the activity test,saying it was the ninth report in two years to call for its abolition.
The activity test links how many hours are worked each week to the hours of subsidised childcare a parent is entitled to.
“This test has been a barrier for many disadvantaged families,hindering their access to essential childcare services,” she said.
Early Childhood Education Minister Anne Aly said she would consider the ACCC report alongside another a Productivity Commission report due in June. That report is separately examining childcare cost and ways to improve outcomes for children.
Amy Holden with her son Calvin Holden,4.LUIS ENRIQUE ASCUI
“We’ll carefully look at the recommendations from the report,including consideration for alternative approaches for vulnerable cohorts such as First Nations families,” she said.
Amy Holden said childcare was costing her family more than their million-dollar mortgage every month,totalling about $1700 a week for two young kids. She estimates she earns $30 a day after paying for childcare.
“My husband and I both work full-time and my daughter’s fees have just gone up again for the third time in 10 months,” she said.
“When I asked the childcare centre about any fee relief,because we were struggling with fees,they told me I could reduce my working hours. I’m not in a job where I can work part-time and I feel I’m being penalised for trying to keep my career alive.”
Some parents taking the year off work could access heavily subsidised childcare,she said,but “my husband and I are killing ourselves,adding to the economy,but paying a fortune not to see our kids”.
With Sherryn Groch
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