Tens of thousands of childcare workers will avoid pay cuts after the Albanese government agreed to double its $3.6 billion election pledge to increase early pay for educators, due to end this year.
Funding for a two-year deal to give pre-service teachers a 15 percent pay raise, announced before the 2025 election, was set to expire in December. 60 thousand workers were facing wage cuts of 5 to 6 percent, according to the United Workers Union, which was threatening to strike next month if the subsidies were not extended.
A cap on how much providers can raise fees was also set to expire in August, prompting calls from advocates for a new plan to prevent further price hikes for families.
Childcare costs rose by 9 per cent in the year to April, beating inflation, according to the latest data from the Australian Bureau of Statistics.
Child care centers that had signed up to receive subsidies had to face the problem of salary cuts or fees climbing more than 4.2 to 4.4 percent to cover the gap when the government funding ended. Other stations did not take the grant, claiming it would not cover their costs, instead raising fees to pay staff.
Prime Minister Anthony Albanese vowed in 2024 to fund a pay rise for childcare workers. The government was banking on the Fairness Commission for a quick wage increase for women-dominated industries to replace the subsidy until it expires, but the commission instead extended the extension to 2029 to help providers manage costs.
The government will fill the gap by extending the taxpayer-funded subsidy, also known as the worker retention payment, to 2028, costing taxpayers another $3.6 billion.
Increasing and stabilizing the workforce will be key to the prime minister’s goal of universal childcare, although any major reforms to the sector were left out of this year’s budget as Treasurer Jim Chalmers warned the government could not afford it.
Albanese said early childhood educators played an important role in society and deserved to be paid fairly while the government worked to reduce costs.
“Only daycare centers that agree to lower their fees for parents will be eligible to receive funding for this employee wage increase,” Albanese said.
The family care and home care industries will be eligible for the first time from July.
The government will also link the funding to providers who meet the National Quality Standards from mid-2027, in an attempt to increase adherence after multiple revelations of child abuse rocked the industry.
Education Minister Jason Clare said Labor had been working hard for the past year to strengthen safety and that linking that funding to standards was the next step.
“There is nothing more important than the safety of our children. This will help ensure the safety and quality in early education is what parents expect and our children deserve,” Clare said.
Combined with this month’s minimum wage increase, the grant means a regular teaching teacher earns $255 more a week and early childhood teachers $410 more than when pay started in December 2024.
The industry’s levels have increased by about 8 percent, or 20,000 workers, since then, and job vacancies have decreased by about 31 percent.
Fees at facilities that chose to receive the payment grew at about half the rate of facilities that did not and the number of services operating on staff exemptions – which means they are understaffed – fell from 8.9 to 5.1 percent.
The United Workers Union said last month the wage increase recognized the long-standing undervaluation of early childhood education and care work and had improved employee retention rates.
“This wage increase has made a real difference for families and children who depend on quality early childhood education, by retaining enthusiastic, dedicated workers who want to stay in the industry,” the union’s director of early education, Carolyn Smith, said while lobbying for the increase.
Fertility chief executive Georgie Dent had written to the prime minister seeking certainty for the sector.
The parents’ lobby group highlighted rising childcare costs, saying fees had risen in the past year at three times the rate of inflation, while two in five families were paying out-of-pocket costs above the hourly rate.
“Early childhood education is critical infrastructure for families, children, communities and the economy,” Dent said.
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Brittany Busch is a federal politics reporter for The Age and the Sydney Morning Herald.Connect through email address.
