Government reveals $1.7b Budget pledge to slash childcare costs, Labor hits out at ‘missed opportunity’

Caps on childcare subsidies for higher-income earners would be removed and costs slashed for families with two or more children under a new, $1.7 billion Budget proposal from the federal government.

The policy appears aimed at softening Labor’s attacks on the government over child care, but the Opposition is labelling the policy a “missed opportunity” for reform.

The aim is to reduce disincentives for parents to work more hours in a week.

Childcare subsidies are currently capped at $10,560, beyond which households with an income of more than $189,390 pay the full rate in childcare fees.

The new policy, to be included in next week’s Budget, will remove that cap.

Subsidies for families with two or more children will increase significantly, to a maximum 95 per cent.

The subsidy boost will only apply to the second or subsequent child in care, with 30 per cent more applying to those children.

For example, if a family’s first child in care is eligible for a 65 per cent subsidy and their second child enters care at the same time, the second child would be eligible for a 95 per cent subsidy.

It aims to stop the cost of childcare doubling, or potentially tripling, for families with multiple children in care.

The government suggests the change will benefit a quarter of a million families, by an average of $2,260 per year.

The changes are targeted at families with multiple children, based on an assessment that those families tend to bear proportionally higher childcare costs.

Treasurer Josh Frydenberg said he wanted parents who wanted to return to work, or lift their hours, to have that option.

“Our focus has been on ensuring that families have choice,” he said.

“And right now, without this package, there would not be as much choice for families where the parent would want to work that fourth or fifth extra day.”

Treasury suggests the changes will boost GDP by up to $1.5 billion, through making it easier for parents to work more hours.

The changes will apply from July 1, 2022.

The Opposition detailed a more generous childcare policy late last year.

That policy would similarly scrap the childcare subsidy cap, but would go further in boosting subsidy rates, offering subsidies for families earning up to $530,000.

The Coalition’s budget proposal is more targeted at low-to-middle income earners.

Labor’s spokesperson for Early Childhood Education, Amanda Rishworth, said the policy excluded too many families — particularly many with just one child in care.

“Families right across the country are struggling with the cost of childcare,” she said.

“The most recent [Australian Bureau of Statistics] figures have indicated that they are the highest-ever out-of-pocket costs facing Australian families.

“So now is not the time to pick a few families to get the benefit, now is the time to reform the system so the majority of families get the benefit.”

Opposition leader Anthony Albanese defended the generosity of his party’s policy for high-income earners, arguing the subsidies should not be considered welfare.

“They’ve gone a step towards Labor’s policy of cheaper childcare,” he said.

“But, somewhat ironically, are saying that ours is too helpful to families who have children.

“That’s because they don’t understand that this is about economic reform — not about welfare policy.”