Thousands of Australian families struggle to make ends meet as the costs of childcare continue to rise. Following a surge in demand for early childhood centres in the past five years, Australia now faces an oversupply of childcare centres, which is much worse than it sounds.
Australia now faces an oversupply of childcare centres, which is much worse than it sounds
What is the problem?
In the past five years, Australia experienced a significant increase in demand for early childhood education. Consequently, more childcare centres have begun surfacing across the country to get their slice of the pre-school pie.
According to a report by the Department of Education, vacancies in Australian childcare centres in 2018 has jumped by almost 48,000 places in three years.
There is now an oversupply of childcare facilities for the current demand resulting in high numbers of vacancies which contributes to financial losses to the childcare company and ultimately, to parents. In 2018, it costs an average of $140 a day to send a child to childcare, with prices rising to $180 a day in capital cities.
The national vice-president of ACA Nesha Hutchinson says, “There’s no denying the fact that prices have increased over the last 10 years, and over the last five years significantly”.
So, why is Australian childcare so expensive?
There are two primary reasons why the price of childcare in Australia is so high. One reason is the new regulations under the National Quality Framework (NQF)
To meet the NQF requirement, a childcare centre must employ a sufficient number of staff to comply with staff-to-child ratios, which for two and three-year-olds requires one staff member to five children.
The second reason for the unexpected upward pressure on childcare prices is lease costs. A childcare facility’s lease is tied to the number of spaces available at licensed centres, rather than the number of children attending. This means that vacancies increase the cost of childcare to a parent as the centre needs to pay off their lease based on classes with full enrollment.
According to the Victorian president of the Australian Childcare Alliance (ACA) Paul Mondo, lease costs are averaged between $2,500 and $4,000 per childcare place. For example, if a childcare centre has 50 spaces available across the age groups, the centre could face a minimum of $125,000 a year in lease costs, excluding wages, utility bills and food costs.
Family researcher and author Dr Stacey Fox says, “Australian families spend about 35% of their private income on pre-school programs in Australia”.
Where is the money going?
The exorbitant lease costs childcare centres are charged soaks up a large amount of the total income available to childcare centre, while staff wages are put on the backburner.
Ben Phillips, a principal researcher at the ANU’s Centre for Social Research and Methods says, “typical (childcare) wages would be between $40,000 and $50,000 (per annum)”.
Childcare prices have skyrocketed while staff wages remain below the national average, presenting little opportunity for career progression. Something has to change to allow for the affordability of childcare to all families.
Read next week’s segment of The Childcare Chronicles to see what the major political parties have proposed for the future of Australian childcare and how it will affect Australia’s parents.