The Albanese government’s first full-year budget will contain $9bn more in childcare subsidies over four years than the Coalition’s last, but advocates fear calls for abolition of the activity test have not been heard.
The treasurer, Jim Chalmers, and ministers for early childhood and education released figures on Tuesday showing that 1.2 million families will benefit from increased childcare subsidies as the government fends off criticism that it is not doing enough to combat rising cost of living.
Labor’s cheaper childcare legislation, promised in Anthony Albanese’s 2020 budget reply and passed in November 2022, lifts subsidy rates for 97% of families who earn less than $530,000.
The policy has resulted in total spending on childcare subsidies of $55.3bn in the four years from 2023-24, up from $46.3bn promised over the same time period in the Coalition’s March 2022 budget.
This includes an increase of $1.4bn to $12.7bn, or 12.35%, in the first year of the package of higher subsidies, which take effect from 1 July.
But according to Minderoo Foundation’s Thrive by Five campaign, abolishing the activity test alone would cost $1.3bn in 2023-24, meaning the government figures appear to confirm it has not made a big enough allocation of funds to remove the test in the May budget.
The test reduces subsidies for childcare where one parent works less than 15 hours a week, resulting in an estimated 126,000 Australian children from low-income households missing out on early childhood education.
The Albanese government has been urged by both its women’s economic equality taskforce and the economic inclusion advisory committee to scrap the activity test for childcare subsidies.
The committee said the test was an example of a policy that “reduces rather than enhances economic inclusion, especially for women, and causes additional hardship and disadvantage for children”.
Advocates fear they have failed to persuade the Albanese government to abolish the test and are engaged in a final-week push to do so before the 9 May budget.
The government has promised a “significant response” to the committee report in the budget, but has refused to say whether individual recommendations will be supported or contradict reports that a boost to jobseeker will be limited to over 55s.
Chalmers said the budget “will be carefully calibrated to ease the cost of living for families without adding to inflation”.
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“Making childcare cheaper is one of the single most important things we can do to take pressure off working Australians in a way that won’t make the job of the Reserve Bank more difficult,” he said.
The education minister, Jason Clare, said the childcare spending will “help with cost of living pressures and make it easier for parents to return to paid work, or work more paid hours, if they want to”.
The early childhood education minister, Anne Aly, said that “children who access early childhood education do better on key measures throughout life, including improved literacy and numeracy skills, better health outcomes and go on to higher paying jobs”.
When the Coalition was in government it attacked Labor’s childcare policy as too expensive, but the Liberal leader, Peter Dutton, finally offered bipartisan support for it in his first budget reply in October, welcoming “the extension of the childcare subsidy to more Australian families”.
The May budget will also contain $72.4m over five years in new funding to increase skills and training of early childhood education and care sector workers.
This package will benefit more than 80,000 early childhood educators, including by providing backfill for 75,000 early childhood educators, teachers and centre directors to undertake professional development.
Aly said “early childhood education is a wonderful career with a clear path for progression; we’re making sure the workforce can access the development opportunities they need”.
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