Factors Influencing Changes in Out?of?Pocket Child Care Costs

Question

Senator HODGINS-MAY: I might finish in this block then. Thanks. I've got some questions around affordability. Families are facing enormous cost-of-living pressures at the moment, and the talk at my local playground is around the extremely high expense of early childhood education and care. It is one of the largest expenses after housing, which is pretty phenomenal, given the rest of our fantastic public education system. Can the department explain why out-of-pocket costs rose by almost 12 per cent over the last year despite childcare fees being capped. Mr Reed: For the childcare CPI, the latest increase, the latest annual change, was nine per cent. But there are a few factors that go into that; it's not just increased fees. In fact, fees have only increased by 4.6 per cent over the last 12 months, and that's lower than the long-term average. That's much lower than the five- and 10-year averages and is largely due to the fee capping implemented through the worker retention payments. We know that, for services in the worker retention payment, their average fee growth has been 3.5 per cent compared to over seven per cent for services that aren't in the worker retention payments. We know that the fee capping is having an impact and has brought down the annual fee increases compared to the long-term average. But other things that contribute to the childcare CPI increases are things like family income, for instance. Family income is increasing at a higher rate than WPI, so, for families within the childcare system, their family income is increasing at a higher rate than the general population's, and that reduces their subsidy rates, which increases their out-of-pocket costs. Things like that contributed to it. It's fee increases and things like changes in family circumstances. There are multiple things that go into the childcare CPI-more than just the fee increases from services. Senator HODGINS-MAY: That's another compelling reason to continue the worker retention payment. You've explained a few factors, but to what extent do you think fee increases are also driven by the gap between actual fee growth and the slow growth in the childcare subsidy hourly rate cap? Mr Reed: That would be a contributing factor as well. More services going over the hourly rate cap would contribute to childcare CPI increases. I can't quantify the different elements that make up the childcare CPI, but that would be one factor. Senator HODGINS-MAY: It'd be helpful if that could be quantified. Is that the sort of thing that- Mr Reed: We have looked into it before, and I don't think it's actually possible to quantify all the different elements' contributions. I think we have looked into that before. I'm happy to take it on notice, but I do recall that, a while ago now, we did look into whether that was possible to quantify, and it was very difficult. Senator HODGINS-MAY: Okay. Keep me posted. Can the department please provide the number of families paying fees above the hourly rate cap in centre-based day care for the most recent quarter, and how does that compare with one year ago? If you need to take it on notice, that's fine. Mr Reed: I can tell you all services, but I'm not sure I've got it broken down by service type. I'm not sure I can tell you by centre based daycare, but for all services it's about 68.4 per cent charging under the hourly rate cap. Just over 31 per cent are charging above, but that's for all services, not just centre based daycare. I don't have it broken down by sector type. Senator HODGINS-MAY: If you could provide that, that would be useful.

Answer

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Documents

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• SQ26-000709.pdf (opens in a new tab)