Childcare has been one of the most expensive policy mainstays of the major political parties, with both the Coalition and Labor proposing different versions of a $3 billion package. Balancing its status as a sensitive issue in the electorate, the parties need to respond to the two particular concerns raised by the Productivity Commission’s recent enquiry into the childcare system, namely the design of the payment system, and price hikes by childcare centres which force greater government expenditure.
Finding the system to be overly complex and costly, the Commission also identified that the complications introduced by the two subsidy streams sometimes caused distortions within the childcare system. This meant that the greatest subsidy was given to higher income families who accessed more premium childcare services.
The $3 billion package proposed by the Coalition in the 2016/17 Federal Budget focusses on streamlining the current childcare subsidies system into a single means-tested payment, from 1 July 2018. The current system has both a means-tested Childcare Benefit (CCB) and a non-means-tested Childcare Rebate (CCR), which is capped at $7,500 per child per year. In line with the Productivity Commission’s recommendation, the Coalition is looking to condense that to one overall payment which is dependent on subjecting families to an activity test. Parents must either by employed or in education for a certain number of hours in order to be eligible to receive the government childcare subsidy, which are expected to be higher than current employment/education requirements.
As one of the most expensive policy features, its funding is of particular importance to consider and verify, and here the Coalition point to savings made by changes and reductions to Family Tax Benefit payments.
The package involves having a single subsidy provided to families which tapers from 85 per cent for the lowest income families, to 50 per cent for the highest income families earning above $170,000. All families with incomes of $65,000 or less will receive the full 85 per cent subsidy, which then reduces by a percentage point for every $3,000 earned above the threshold. There is no cap imposed on the annual provided subsidy to families, except for those who earn in excess of $185,000, in which case the annual subsidy is limited to $10,000 per child.
Modelling done by ANU academics Ben Phillips and Cukkoo Joseph, as commissioned by The Parenthood, found that middle and high income families would be better off under the Coalition’s policy, compared to Labor’s.
A $3 billion package is also proposed by Labor, designed as additional funding for the current childcare system, put into effect from 1 January 2017, well ahead of the Coalition. Labor aim to keep both the CCB and the CCR as a two-stream system, but make both streams more generous in order to provide greater financial support for families. Its funding would stem from a range of cost-saving measures by Labor, including its reforms to negative gearing.
The package involves increasing the non-means-tested childcare rebate cap from the current level of $7,500 per child per year, to $10,000 per child per year. The means-tested childcare benefit will also be increased by 15 per cent. Specifically, Labor is also targeting specialised childcare services for Indigenous children with its funding, and $160 million for increased childcare and after school care places in high demand localities.
In order to address one of the main concerns of the Productivity Commission’s enquiry about price inflation by childcare centres, Labor’s policy is also tied to the provision of special powers to the Australian Competition and Consumer Commission, which would allow the watchdog to better prevent childcare providers from price gouging.
Modelling conducted by Phillips and Joseph found that lower income and very high income families (those earning more than $250,000) would be better off under Labor’s childcare policy compared to the Coalition’s, by up to about $2,395 per year.
Streamlining the current system to a single means-tested childcare payment forms the basis of the Greens’ childcare policy. Guiding the policy is the long-term aim of implementing a universal access system. Under the proposal, all children will be guaranteed at least 24 hours of means-tested subsidy, which has been empirically identified to be the minimum required for a difference in early childhood development.
In addition, the Greens propose a $200 million ‘Reducing Waiting Lists’ grant fund constructed specifically to address the current issue of extended waiting lists and the lack of places. With the fund, childcare centres would be able to apply for additional funding to use to expand their centre and accommodate a greater number of children.