What changes to the child care subsidy could mean for eastern suburbs parents

Last week, we took a look at the availability and scarcity of childcare places across the eastern suburbs. Next, we wanted to take a look at what is often a significant roadblock to families across Melbourne’s eastern suburbs: cost.

Let’s imagine you’ve been waiting for a space for two years, but once a space opens up, the price has increased since you first looked and certain restrictions are now in place meaning you are unable to access the Child Care Subsidy.

The Federal Government seems to have heard calls to scrap the “Activity Test” — which limits the amount of subsidy provided to families depending on the amount of activity (paid work, study or actively looking for work) they do each fortnight — with Early Childhood Minister Anne Aly introducing legislation into Parliament this week to guarantee three days of subsidised daycare per week.

💲Here is the current situation with costs💲

The current average daily cost for childcare services in the eastern suburbs was about $154.40, before receiving any subsidies.

From November 2023 to November 2024, early childhood education and care fees have increased by 10.6 per cent.

The Federal Government has capped fee growth at 4.4 per cent between August 8th August, 2024 and 7 August 2025, which will then be bumped down to 4.2 per cent between August 8th and 7th August, 2026.

Most parents are eligible to have part of this paid via a Child Care Subsidy (CCS) from the Federal Government, with the amount you can receive dependant on your family’s income, the hourly rate cap, the hours of activity you and your partner do (the “Activity Test”) and the number of children in your care.

As part of the “Activity Test”, the government asks for you and your partner’s activity (e.g. paid work, study or actively looking for work). They then use the lower number of hours between you and your partner.

The maximum amount of subsidised hours per fortnight was 100 hours (about 10 days of long daycare), but requires both you and your partner to work at least 48 hours per fortnight.

The minimum has been set at 24 hours (about 2.4 days of long daycare) per fortnight if the activity level is eight hours or below and you earn below $83,280.

🗳️ What do candidates and advocacy groups suggest should be done?

Deakin Independent candidate Jess Ness has pledged to support scrapping the “Activity Test” entirely if she is elected later this year.

“[It] unfairly penalises parents who aren’t in traditional full-time employment, and can unintentionally be a barrier to parents seeking employment, a bit of chicken and egg situation,” she told the Eastern Melburnian.

“You can’t get work without childcare, and you can’t get childcare without work.

“Every child deserves access to early learning, and parents should be supported in their work and job-searching efforts.”

Ness said there had been positive steps made, including the government’s expansion of paid parental leave to 26 weeks by 2026, but more needed to be done.

“The system must be monitored and adjusted to ensure it genuinely supports gender equality in caregiving,” she said.

“Policies must be designed with parents, providers, and educators at the table.

“We also need a long-term plan to ensure the system is flexible enough to adapt as family structures and work patterns evolve.”

Ness said Australia should take lessons from Norway and Sweden on how to better subsidise childcare.

“Their systems are heavily subsidised, with parents paying only a small portion of the cost based on income,” she said.

“This investment results in higher workforce participation, reduced financial stress for families, and improved child development.”

Casey Independent candidate Claire Ferres Miles said the Federal Government’s move to increase the wages for childcare workers was a positive step forward.

“A wage increase for early childhood education and care workers announced in 2024 was a good start,” she told the Eastern Melburnian.

“Access to high quality childcare services is the largest barrier and the key that unlocks opportunities for women to work - both returning to work and the opportunity to increase hours worked.”

Casey MP Aaron Violi has also backed a rethink of childcare costs in the region, telling the Eastern Melburnian he was aware of parents having to put themselves on waitlists before their children are even born.

Advocacy group The Parenthood chief executive officer Georgie Dent said the news that the Federal Government was scrapping the “Activity Test” was the “most significant step towards creating truly universal early education and care”.

“We really hope this legislation gets through because it’s a monumental win for children, parents and the economy.

“A vote against this would be a vote to deny up to 126,000 Australian children from low-income families a fair start to their education.”

👶 How are childcare businesses keeping up?

Wages for workers in the sector have started to receive increases towards 15 per cent over two years under laws that passed Parliament in November 2024.

However, this would only apply to centres which had agreed not to push up fees by more than 4.4 per cent.

Mums of the Hills president Dr Belinda Young said she had heard from local mothers who were shocked by sudden fee increases following a boost in the CCS.

“The cost of childcare can be completely prohibitive,” she told the Eastern Melburnian.

“There were cases when the rebate was increased…in certain centres, we heard that there was a sudden increase in the pricing per day.”

Speaking to reporters on January 28, Education Minister Jason Clare said centres needed to be aware they would not see the additional wages if they increased their fees too high, too soon.

“I suspect that most centres will increase their fees somewhere between zero and up to that 4 per cent over the next 12 months,” he said.

“The key thing is they can't go beyond that, and that's a big part of this deal.

“Number one, we want to make sure that the money goes to the worker, not the centre, and number two, in order to get that funding, they cannot increase their fees by more than four per cent.”