Rachel Hill, a mother of two from Sydney, explains the maths of family planning.
The not-for-profit worker recently bumped up her workload from two days a week to full-time to try to cover ever-rising costs. Instead, the additional money has been swallowed by childcare fees.
“I did not want to go back full-time, it was purely because of the cost of living,” she says.
“We went from paying around $۱۷۵ a week for four days of care … to now paying $۵۳۶ a week for five days, so any increase I got in my salary I’m basically now paying in day care.”
Hill says her husband always wanted a bigger family. If raising children were more affordable, they may have considered having a third. But with only a small village around them, she says “it’s just not working”.
“If our circumstances were different I might have had more reason to pursue more children, but financially it just wasn’t ever going to work for us.”
The prime minister, Anthony Albanese, wants universal childcare to be his political legacy, his entry to the Labor hall of fame alongside Medicare and the National Disability Insurance Scheme. It should, he says, be “as natural as public school”.
But the sector has been rocked by widespread allegations of child abuse and safety breaches, damaging public trust and forcing the government to tighten standards – all while trying to figure out what a universal system might look like and how to pay for it.
It is working against a ticking clock: the ۲۰۲۶ intergenerational report, released last month, showed deaths would outnumber births in Australia by the ۲۰۶۰s. Australia needs more babies, and Labor says universal childcare is key to making that happen.
What is universal childcare?
While many might presume universal childcare means free childcare – akin to public schools for older children – the government has defined it as care that is “available, quality and affordable”. Overseas examples point to provinces in Canada which offer $۱۰ a day capped care, or Estonia, where fees are capped at low weekly or monthly rates tied to the minimum wage. Labor won’t yet say which model it would choose, but have indicated it is likely to be means-tested.
It has commissioned two consulting firms to produce separate work outlining the scope of the challenge. The biggest report is by Deloitte and aims to set out the cost of delivering childcare services in any part of the country – metropolitan, outer-suburban, regional or remote.
The work requires the cooperation of about ۱,۰۰۰ childcare centres across that geographic spread, but they have not been forthcoming. The low turnout of volunteers has led to the government compelling service providers to hand over the centres’ financial data. Deloitte is due to hand the report to government by the end of the year.
The cabinet is also currently mulling over a report by KPMG which outlined the business case for the government owning and leasing childcare centres. The work – which the government has refused to release, citing cabinet in confidence rules – centres around the $۱bn building early education fund, which provides for state governments and not-for-profits to set up centres in childcare deserts.
The first grant round from that fund was announced this month, with $۱۷.۳m split between three not-for-profit providers to build four childcare centres in outer metropolitan and regional areas. Dozens more are yet to be announced.
It gives us a clear hint of where Labor believes it can make a mark. The government wants to see not-for-profits making up a bigger share of the childcare sector, with ۷۰% of the sector currently privately run.
“Outer suburbs and regions where there are growing families, but not enough childcare places, we want to build more quality, not-for-profit early learning in those places that need it the most, and it is part of our journey towards universal early education,” the childcare minister, Jess Walsh, told Guardian Australia.
That shift is already starting to happen. In August, the for-profit provider Edge Early Learning went into administration, while competitor G۸ has closed dozens of under-enrolled and underperforming centres. This week, Goodstart Early Learning, a not-for-profit provider and one of the recipients of the building early education fund, signed an agreement to investigate the potential take over of up to ۳۱ of Edge Early Learning’s ۶۴ centres.
Goodstart’s head of advocacy, John Cherry, says there is “certainly an opportunity there for the not-for-profit sector to expand, but at the moment, not-for-profit providers around the country are running on very thin margins and very challenged by operational conditions”.
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Not-for-profit childcare providers are not necessarily cheaper for parents – comparison website childcare estimator says fees are about ۸% cheaper at some not-for-profits – but they consistently have higher quality and safety ratings.
Changing the subsidy
Any reform would also have to tackle the childcare subsidy.
Currently, a family with one child and a household income of up to $۸۸,۵۲۰ receives a government subsidy covering ۹۰% of childcare fees. That subsidy tapers off at a rate of ۱% per additional $۵,۰۰۰ of income, running down to nothing when the household income reaches $۵۳۸,۵۲۰.
Labor has consistently raised these subsidies since it came to power in ۲۰۲۲ and says a family with a household income of $۱۶۸,۰۰۰, with one child in care for ۳۰ hours a week, is $۷,۴۴۰ a year better off than they would be without the higher subsidies. But the fees themselves have been rising quickly, jumping ۷.۳% in the ۱۲ months to August – more than twice the inflation rate.
The childcare subsidy was projected to cost the budget about $۱۶.۲bn last financial year and is slated to rise to $۱۸.۴bn by ۲۰۲۸-۲۹.
The government already has a blueprint for universal childcare sitting on its desk. In June ۲۰۲۴, the productivity commission looked at three options: the recommended option was free childcare for families with a household income under $۹۰,۰۰۰, then progressively dropping the subsidy down from ۱۰۰% towards zero with every $۵,۰۰۰ increase in household income, tapering off at $۵۸۰,۰۰۰. For a household income of $۱۶۸,۰۰۰, mentioned above, that would be an ۸۵% subsidy.
The productivity commission also modelled a flat $۱۰ a day or ۹۰% subsidy option for all families, but said the cost to the budget would be much higher and the benefit would disproportionately go to wealthier households.
Parents have to wait until their children turn three to get further relief, when additional subsidies offered by state governments for preschool kick in. But preschools run on school terms and typically offer ۱۵ hours a week, leaving considerable gaps for parents working full-time.
The fees currently faced by parents are comparable to private school fees, says Eshanee Collins, a Sydney-based mortgage broker. She says returning to work was part of her identity after having children, but the cost of care made it a tough decision.
“I work full-time, and in all honesty, our household would probably be better off if I didn’t work and [did] not pay that [childcare] money,” she says.
Childcare is likely to become a key election battleground, with the Coalition looking at both the design of the childcare subsidy and paid parental leave settings, while One Nation has promoted income splitting and other policies that incentivise one parent staying home.
The Greens, meanwhile, have commissioned parliamentary budget office modelling on the cost of providing ۵۰ hours a week of free childcare, which could cost $۱۲۷bn over a decade.
Whichever way it’s sliced, childcare is expensive to run and public buy-in is essential. Labor is running out of time to decide what model of universal care they want to pursue – and how to get voters on board.
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