Muted price increases for the ECEC sector reported by ABS in Q3 2022 with Melb and Syd standouts

Prices for early childhood education and care (ECEC) remained relatively muted in the three months ending September  2022 across the metropolitan cities of Australia compared to the previous quarter with a fall in Sydney and small rise in Melbourne acting as a drag on nationwide growth. 

 

The data, released by the Australian Bureau of Statistics (ABS) as part of its Quarterly CPI series, showed that net (after subsidy) prices were still substantially lower than the high point recorded in March of this year as changes to the child care subsidy (CCS) continued to flow through and providers in the large east coast states refrained from excessive rises. 

 

 

The new CCS affordability measures, which were introduced late in March 2022 and include a boost for families with more than one child in care, were the primary driver of the reduction in overall affordability in the June quarter with prices settling at 5.4 per cent lower than the previous year in this quarter. 

 

To some degree the momentum created by the CCS change has flowed through into the third quarter with the rebasing of the CCS cap supporting another period of relatively muted growth but the larger drivers were the minimal increases in prices in Australia’s two largest metropolises Sydney and Melbourne. 

 

Prices in Sydney fell by 0.1 per cent and Melbourne rose just 0.1 per cent in the period which are not just low levels compared to other cities across Australia, but also low levels relative to previous September quarter readings. 

 

 

It is unclear what is driving the performance in Sydney and Melbourne at this juncture and whether we will see a period of “catch up” in the months ahead but it is evident that both Sydney and Melbourne prices are still below those recorded prior to the introduction of the CCS in July 2018.

 

Looking across the country five states and territories are still tracking below June 2018 price levels with Brisbane, Perth and Darwin tracking above even after the implementation of the new affordability measures passed in March 2022. 

 

 

Brisbane has been notable in that it has persistently seen higher fee increases than its other larger east coast cities, with Perth following up close behind. 

 

Overall fee growth across Australia was down 5.4 per cent compared to the same period last year, a substantial fall and the second consecutive month of falls. This is set against a backdrop of persistent inflation across other areas of the Australian economy. 

 

The Consumer Price Index was up 7.3 per cent in the September quarter according to the ABS release, up slightly from the 6.1 per cent recorded in June. 

 

 

Over the last decade ECEC fees have been rising at a rate of around 6 per cent per annum with the CPI tracking at almost half of that, however, in the current paradigm we are seeing broader prices feed through the economy but ECEC  bucking the trend. 

 

Admittedly, part of this will be the affordability measures  mentioned above, but as we have seen in Sydney and Melbourne those decreases only partly explain the muted growth recorded last quarter. 

 

The ABS will release its next quarterly CPI update in January 2023. Access the most recent CPI update here.