The highest subsidies go to families earning below about $70,000 a year. The rate steps down so families earning between $175,000 and $254,300 receive a 50 per cent subsidy and then steps further so those earning between $344,300 and $354,300 get a 20 per cent subsidy. Above this income threshold, there is no subsidy.
Changes that started in March increased the subsidy rate for second and subsequent children where families have more than one child under the age of 5 in care, by 30 percentage points, up to a maximum of 95 per cent.
Labor’s proposal will lift the subsidy rate for all families, smooth out the taper rate so it doesn’t abruptly step down, and gives subsidies to families earning up to $530,000. It will also keep the higher subsidies for younger siblings.
Aly will task the Productivity Commission before year’s end with examining the entire sector, with an aim of a universal subsidy of 90 per cent. She’ll also ask the Australian Competition and Consumer Commission to design a price regulation mechanism to make sure higher subsidies don’t translate into higher fees.
While the Coalition attacked Labor’s plan for paying the fees of wealthy families, those at the top end of the income scale get the lowest subsidies – about 7 per cent for a household income of $500,000.
An analysis of the proposal by ANU Centre for Social Research and Methods associate professor Ben Phillips finds that while the largest benefits in dollar terms would go to parents in the top 20 per cent of incomes, that is because they get either no subsidy or a lower level under the existing scheme.
Those earning up to $86,000 will be an average $358 better off a year.
Out of the almost 1.2 million families using childcare each year, all but about 14,300 would be better off than they are now.
Dent said it was also important the government dealt with existing workforce shortages before adding extra demand for childcare.
She’s been hearing from parents whose childcare centres are having to restrict the number of places on offer or even close rooms because they can’t get enough staff.
“The situation with the workforce is a crisis and it’s only increasing,” she said.
Aly says addressing the workforce shortage has to be a cross-portfolio effort. She doesn’t want to take anything off the table, including migration and improving pay and conditions.
But she’s confident the transitional approach – with the sliding scale of subsidies first – will allow the sector to meet the increased demand.
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