Childcare providers could be named and shamed for charging exorbitant fees.
The second interim report by the Australian Competition and Consumer Commission (ACCC) into the childcare sector found fees and operating costs have jumped, with concerns the industry was failing to deliver.
It found childcare is costing Australian parents more than it is those in many other developed countries, according to a new report by the consumer watchdog.
And despite the federal government contributing more to childcare fees compared to other countries, costs in Australia are rising faster than elsewhere in the world.
The report called for more information to be shared publicly with parents, focusing on which childcare providers were posting larger profit margins at the expense of parents and childcare staff.
Education Minister Jason Clare said the recommendation to name and shame centres charging larger than average fees was a good idea.
"The idea of naming and shaming providers that are charging over the top fees makes a lot of sense to me," he told Sky News on Sunday.
"If people were taking advantage (of cheaper childcare laws) just to jack up fees out of proportion with what's happening with the economy, then there should be pressure placed on them."
Education Minister Jason Clare said the recommendation to name and shame centres charging larger than average fees was a good idea. Source: AAP / Darren England
"As the competition and consumer regulator, we have carefully examined the childcare sector and the impacts for consumers," ACCC chair Gina Cass-Gottlieb said in a statement on Sunday.
"We have found market forces under current policy settings are not delivering on accessibility and affordability for all children and families across Australia."
These are the key takeaways from the report.
Childcare is less affordable in Australia than elsewhere
In 2022, an Australian couple on average wages with two children had more of their net household income going to childcare costs than those in other Organisation for Economic Co-operation and Development (OECD) countries did.
They spent 16 per cent while the OECD average was 9 per cent. That saw Australia rank 26 out of 32 countries — and that's despite the federal government contributing more to childcare fees than other developed nations, according to the report.
The report notes that the OECD data does not cover a period following the , although SBS News has previously reported that just as the change came into effect.
Fees are rising faster
The report found that gross fees — those before any rebates or subsidies — in Australia increased 7.3 per cent from 2018 to 2022 when adjusted for inflation. In that time, the OECD average fell by 7.1 per cent.
The report theorises that the decline in the OECD average might be due to other countries increasing supply-side subsidies — provided directly to providers — more so than Australia.
"We have observed that many countries have decided to spend more on childcare to improve affordability and are moving towards greater regulation of childcare fees by offering low fees or free hours, supported by supply-side subsidies," Cass-Gottlieb said.
Australians may also be paying higher fees if childcare providers are setting prices to generate bigger profit margins, the report says — although it notes it has not performed a country-by-country comparison of profit margins.
A problem with hourly rate caps
Australia has mechanisms in place to assist with prices, but the system is complex.
The childcare subsidy can be difficult for parents and guardians to accurately estimate their entitlements, the report found, meaning some struggle to accurately calculate the out-of-pocket expenses for childcare.
The system is also calculated on an hourly basis, while childcare centres typically charge daily rates. This means the hourly rate cap is unlikely to be effective in guiding parents' price decisions, the report says.
"The evidence suggests that centre based daycare providers are tailoring session lengths for the households and demographic groups they serve rather than engaging in price competition," it says.
"By maximising a household’s subsidised hours and minimising their out-of-pocket expense, providers appear to be able to maintain or increase their revenues and profitability."
The childcare divide
Market forces have driven greater supply of childcare in high-socioeconomic areas and major cities, the report found.
But those in remote communities, and locations with a higher proportion of lower-income households had fewer childcare services and are relatively under-served.
"Our findings highlight that childcare is used by children and households in significantly different situations with vastly differing needs. A ‘one size fits all’ approach that achieves all desired outcomes is not likely to be possible," Cass-Gottlieb said.
What recommendations have been made?
The report includes a number of draft recommendations.
They suggest reforms to the hourly rate cap, and for the government to closely monitor prices and have an intervention mechanism in order to place downward pressure on fees.
The government should also consider additional supply-side subsidies, and it should consider targeted support for First Nations and under-served communities, the report says.
Where to from here?
More than one million Australian households used childcare last year, and most households with children access childcare at some point in their lives.
The ACCC published its first interim report on 5 July and released its second on Sunday.
The recommendations are based on an analysis of the nature of childcare markets, the childcare subsidy, and the role price and quality play in the demand for and supply of childcare across Australia.
The report contains interim findings and draft recommendations for the government to re-examine childcare policy.
The final report is due by 31 December. Submissions can be made via the ACCC website until 29 October.
- With AAP.
