Productivity Commission Recommends Free Child Care for Low-income Families and Increased Subsidies

A government-commissioned inquiry has recommended significant changes to child care subsidies in Australia, particularly for low- and middle-income families. The Productivity Commission has suggested that families earning under $80,000 per year should receive a 100 per cent subsidy for child care. Additionally, families earning less than $140,000 should benefit from a full subsidy for subsequent children aged five and under. These subsidies would gradually phase out for families earning above $580,000.

A key recommendation is the removal of the childcare subsidy “activity test,” which currently limits access for those not engaged in paid work. The proposed changes aim to reduce out-of-pocket costs for families, with the report estimating that half of all families with one child in care would pay less than 10 per cent of capped hourly costs.

While the report does not support a universal 90 per cent subsidy for all families, it is viewed as a step towards universal childcare access. Education Minister Jason Clare welcomed the report, highlighting its potential to improve access to early education, particularly for disadvantaged families. The changes could increase early childhood attendance by 10 per cent, predominantly benefiting low- and middle-income families.

The recommendations would significantly increase government spending, with annual costs rising from $12 billion to $17.4 billion. While not fully endorsing a universal subsidy, the report envisions incremental reforms leading to broader access by 2036, with a focus on ensuring that children in disadvantaged communities receive at least three days of care per week.

Read the full article here https://www.abc.net.au/news/2024-09-18/productibity-commission-free-child-care-rejects-universal/104364108