Research shows the cost of childcare pressures on home budgets

The Australian Council of Trade Unions (ACTU) has released new research which shows key living costs, including childcare, are rising much faster than inflation or wages.

The Australia needs a payrise report showed that pressure on household budgets is increasing more rapidly than previously thought.

Typically budget analysis reports compare the percentage change in wages relative to increase in prices as measured by inflation (CPI). The ACTU research differs as it explores the increasing costs of essential items and services, including childcare, and demonstrates that these costs are increasing more rapidly than the CPI. Essential items form a larger percentage of a lower-paid household’s income than average.

The report identifies that in the year to June 2018:

• Childcare increased by an average 6 per cent
• Housing increased by an average 3.1 per cent
• Electricity increased by an average 10.4 per cent
• Gas increased by an average 7.10 per cent
• Transport costs increased by an average 5.2 per cent
• Health costs increased by an average 3.4 per cent
• Education costs increased by an average 2.7 per cent

The report said the CPI is a blunt tool for assessing cost of living pressure. For example, CPI weights childcare as 1.56 per cent of the average consumer’s expenditure, whereas many working families spend higher than that amount on childcare.

The report says “The CPI was never designed to provide an indicator of price changes in the basket of goods and services that a low-income family needs for a reasonable standard of living.”

Since mid-2016, nominal wage growth in the public sector has been 2.5 per cent, while pay in the private sector has gone backward with wages up just 2 per cent per year compared with standard CPI increases of 2.1 per cent.   

But even these figures understate the problem, the ACTU claims, before stating that research shows average hourly earnings have increased by only 1 per cent per annum in the past three years.

Most Australians are seeing their wages go backwards very quickly compared with 5-10 per cent increases in the cost of living for essential services like childcare, electricity and housing, the ACTU says.

ACTU Secretary Sally McManus said of the report “People are feeling the pinch as their budgets are stretched further than the official data suggests, and this research proves this is the case with the key living costs increasing much faster than CPI.”