15% fee hikes for some childcare centres, sector faces ‘dire’ cost increases


A tidal wave of fee increases is coming for parents who send their children to early childhood centres, with hikes of more than 15% planned in some cases, warns the head of the Early Childhood Council.

Simon Laube​ said he wanted families to be prepared for the inevitable, and worried that some centres were not raising fees even when they needed to.

Centres were closing at record levels, and some had struggled last year to focus on anything outside of Covid, he said. The sector was now crippled by absences, teacher shortages, and rising costs.

Many were unprepared when they opted in for pay parity in January, which meant higher funding but also higher costs for some. From last July at centres which opted in, the lowest paid teachers’ salaries rose from $49,862 to $51,358.

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“When the Government brings in new obligations, and you can’t afford to meet those obligations with the government funding you must consider raising fees.

“You’re not doing anyone any favours if you drive yourself out of operation.”

Out of 167 centre managers who were council members, 82% said they were considering increasing fees, with about 5% of them looking at increases of more than 15%, Laube said.

In this year’s Budget, the Government announced $266 million over four years towards shrinking the pay gap between kindergarten and early childhood education (ECE) teachers. The money was to increase the existing parity funding rates and introduce a new set of extended parity rates.

Pay parity had a lot of support, but the funding mechanism was complex and money did not always go to the services facing the higher costs, Laube said.

Government funding – including the ECE Funding Subsidy, 20 Hours ECE, and equity funding – was inflation-adjusted, but the 2.75% increase for this year was well below the current rate of inflation of 6.9%.

In addition, the sector only received government funding for each hour a child turned up, and was not funded if a child missed hours for example due to Covid in the family, he said.

The council lost a few members last year due to the vaccine mandate, and a teacher shortage and funding issues were putting on pressure this year, Laube said.

Government funding had kept the centres alive during Covid, but the owners were worn out. Meanwhile, waiting lists continued to grow.

“Parents need [centres] to say, ‘look, you might have seen your fees going up, these are the reasons why they’re all raising their fees’. But they’re just embattled really.”

New Zealand needed something on the scale of a A$15 billion (NZ$16.5b) overhaul of preschool services announced in Australia last week, he said.

“There needs to be some kind of stimulus to change this trajectory. If we just keep going the way we are, we’re just going to lose more centres, one by one.”

In 2020, 18 private centres closed, which more than doubled to a record high of 47 last year. A total of 121 ECE providers closed last year, including kindergarten and home-based services, up from 88 in 2020 and 100 in 2019.

One private ECE operator said some centres were holding it together “through sheer determination and tears”.

Ruru House had higher teacher-to-children ratios than the Ministry of Education minimum.


Ruru House had higher teacher-to-children ratios than the Ministry of Education minimum.

Qualified teacher Anna Ryder​ opened Ruru House in 2019 in a rural setting just north of New Plymouth. She chose to operate with teacher-to-children ratios above the Ministry of Education minimum, which also affected her funding. Licenced for a total of 54 children, Ruru House had 12 teachers who were all registered, she said.

She was still deciding whether to opt in to pay parity, which she fully supported but was concerned about how much it would bump up fees.

“We’re trying to find the money to opt in. And obviously, either cutting the quality or upping the fees effectively is what it means.”

Ryder first raised fees last year, which she described as “quite an agonising time”. She was concerned that increasing costs limited the number of people who could afford quality childcare, and ultimately families would suffer.

Fees had tended to be higher at city centres than in the provinces, she said. For example, Ruru House charged $40 for three 6½ hour days for three-year-olds, which included lunch and morning and afternoon tea. She saw another centre in Wellington which charged $170 for an equivalent service.

Pay parity meant fees would be more even across the country, but the increase would be more dramatic for the regions.

“Having another cost go up would be quite daunting I’m sure for a lot of our families.”

The Government spent almost $2b a year on early childhood education subsidies.

Andy Jackson​, policy leader (hautū) at the Ministry of Education, said the ministry could not identify from its own data what parents and caregivers were paying in ECE fees, and it was interested in gathering more information, so it could make better policy decisions.

“This requires discussions with the sector on how best to do this, given concerns around commercial sensitivity,” Jackson said.

The ministry was reviewing how pay parity funding aligned with teacher salary costs, and was engaging with the sector.

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