Percentage of LDC services charging above fee cap surges in Q2 2023

Around 28 per cent of all long day care (LDC) services in Australia (as at the end of June 2023) are charging fees that are above the Child Care Subsidy (CCS) hourly rate caps according to the latest data release from the Department of Education’s Child Care in Australia Report. 

 

The report, which is released quarterly, consolidates data gathered from the administrative system that operates the CCS payment system and provides a unique insight into the pricing practices of operators across the country. 

 

The hourly rate caps represent the ‘line in the sand’ over which the Government does not pay  CCS for families using care and has historically been viewed as an anchoring mechanism for fees as any increases above the cap would be shouldered by families and not the Government. 

 

However, since early 2022, approximately two years after COVID-19 commenced, and just as inflation impulses were starting to accelerate, provider’s in their fee deliberations became less concerned about the fee cap as a constraint, a trend that has continued to the present. 

 

 

The increases above the fee cap are notably higher than in the outside school hours care (OSHC) space but remarkably over 50 per cent of family day care (FDC) services are now charging fees above their fee cap of $11.80. 

 

Fee increase growth remains at historic high levels

 

Over the last ten years LDC hourly fee increases have ranged between 3.0 per cent and 7.0 per cent with three notable periods namely; between 2013 and 2017 – where they trended at the top of the range; 2017 and 2021 – when they trended below at the bottom of the range and; 2021 to the present where they moved back towards the top end. 

 

 

The last four quarters have averaged 7.0 per cent and represent a significant period of higher than average fee increases, signaling very clearly that cost inflation, including the Modern Award increases and rental increases, have been actively passed on to families in the form of higher fees in order to sustain the economic viability of services. 

 

Record CCS entitlement disbursements a logical result of higher fees 

 

Although a growing portion of the LDC community are now charging fees above the fee cap, the majority do not, so any fee increases passed by this cohort would translate into a larger CCS draw from the Federal Government. 

 

This is clearly evident in the data release with a record $2.9 billion disbursed in CCS and Additional Child Care Subsidy (ACCS) in the three months to June 2023 of which $2.6 billion, also a record, was allocated to LDC.

 

 

The Government’s CCS contributions amount to $11.2 billion in FY 2023, by far the largest such commitment to the early learning sector over any financial year on record. 

 

To access the Department of Education’s Child Care in Australia Report click the link.