Policy report

Increasing childcare subsidies would support children, families and the economy

Government subsidies Child care Child care assistance Economic modelling Household finance Australia

The early childcare education and care sector was pulled back from the brink of collapse earlier this year when the federal government put in place a rescue package, and made early learning centres eligible for JobKeeper. Those supports are now being removed, and the transition to the pre-existing funding system is now underway.

The Mitchell Institute's modelling examines the impact of the snap-back to parent fees on families on median and low incomes. It also models the impact of increasing the top rate of subsidy from 85% (the current level), to 95%. This analysis shows that even with reduced fees, where parents' income has been reduced, families are still likely to struggle to meet childcare costs. 

Increasing the maximum subsidy rate has been proposed by a range of organisations, and the Grattan Institute has costed the change at around $5 billion per year, on top of the $8 billion currently spent by the federal government on childcare subsidies. This policy change could be made quickly, and it could deliver substantial relief and economic stimulus in a short amount of time, as well as long-term benefits for children’s development.

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