Childcare changes could push up prices by 15%, private operators to be hit: Report

Private childcare centre operators have warned the industry is not ready for sweeping childcare reforms due to start from January 1, 2012, which the Productivity Commission says will push up fees by 15%.

According to The Australian newspaper, the PC report – which will be released this afternoon – says that its modelling suggests that “under current cost-sharing arrangements, out-of-pocket fees for long-daycare services could be more than 15% higher than they would have been without the reforms.”

“Increased fees may see low and middle-income families withdraw their children from early childhood education and care services,” the report is quoted saying.

Under the Government’s plans for early childhood education and care, to be introduced in January 2012, staff qualification requirements will be lifted and child-to-carer ratios will be lowered.

The Government says the plans will lift daily fees by $8 to $9 per week, but the PC says the fee increase will be more like $42.75 per week.

From next year, centres will be required to have one employee per four babies; from 2016, they will be required to have one employee for every five children between 25 and 35 months, and one worker for every 11 older children.

Lucian Roncon, vice president of the Australian Childcare Alliance which covers predominantly commercial operators, says the PC’s prediction is pretty accurate.

Pointing out that around 70-75% of childcare operators are private, the bulk of which are small business, Roncon says the sector is “absolutely not ready” for the 2012 deadline.

“We’re supportive of the initiatives, and anything that will improve care for children. But will centres be ready? No.”

Roncon says it’s impossible to put an exact price to the changes, but the body expects prices to rise between $13 and $32 per day over several years.

He says the Government should either increase childcare benefits or delay the initiatives until they can do so.

Roncon says for his own 90-place centre in Geelong, he will need to increase staff numbers by 24% and his cost of labour will rise by 37.5%.

And perversely, he says that many centres will choose to reduce their numbers, compounding a shortfall of childcare in many areas.

The warning follows a Productivity Commission draft research report in July which tipped that parents could reduce the amount of time they put children in childcare as the Government’s reforms fed through the industry.

The draft report said the reforms would have “far-reaching implications” for the early childhood education and care workforce, which looks after more than 1.5 million children, and employs about 140,000 workers.

“…staffing costs for early childhood education and care services will increase, and this increase will need to be paid for by the service through lower surpluses or profits, by staff accepting less than market wages, by parents in the form of higher fees, or by governments, or a combination of these,” the report said.

The report also casts doubt on the Government’s timelines, saying they “appeared optimistic”.

Former Treasury Secretary Ken Henry had proposed for the childcare benefit and the 50% childcare rebate to be combined, to ensure that low-income parents received higher benefits than high-income parents.