ABS launches Childcare Services Cost Index as precursor to “Wage Increase” annual fee cap calculation

The Australian Bureau of Statistics (ABS) has confirmed it will release a new Childcare Services Cost Index (CSCI) that will be used to measure changes in prices paid by childcare providers for the goods, services and labour they purchase to provide childcare services to families.

Changes in the CSCI amounts will be used as a guide for determining the fee increase limit for providers who have opted into the Worker Retention Payment grants program for the second year of the scheme, from 8 August 2025 onwards.

The current year’s fee increases have already been capped at 4.4 per cent. 

The ABS was funded in the 2024-25 Budget to develop and publish the CSCI to measure changes in prices paid from the perspective of businesses providing childcare services and it is anticipated it will become an important gauge of cost pressures for the early childhood education and care (ECEC) sector going forward. 

CSCI composition dominated by labour costs

The CSCI will cover a range of costs representative of those incurred by childcare providers including consumables (such as food, nappies and educational materials), purchased services (such as cleaning, accounting and financial services) as well as labour and associated on-costs.

Rental, lease and hiring costs are also included in the CSCI. 

Labour costs will make up 70 per cent of the index and will include wages and non-wage components including but not limited to superannuation, workers compensation and payroll tax. 

In addition, any increases in wages funded by the Worker Retention Payment program will be treated as a reduction in costs for providers and will therefore be netted off from the associated wage increases.

CSCI trending lower – Annual fee cap fixed at 4.4% until August 2025

Annual cost increases for the CSCI basket of costs having peaked in Q3 2023 (after the bumper Modern Award increase of 5.75 per cent) have gradually tracked lower, with the Q3 2024 CSCI coming in at 117.0, an increase of 3.5 per cent on the previous year. 

This pull back broadly reflects trends in general CPI data that measures price changes across the Australian economy, which fell to 2.8 per cent in the September quarter, down from a high of 7.8 per cent in December 2022. 

The CSCI will be formally launched on 31 January 2025, as a supplement to the quarterly Producer Price Indexes (PPI) publication with it expected to support decision makers tasked with determining the Year 2 worker Retention Payment fee increase cap to be applied from August 2025. 

To learn more about the CSCI visit the ABS’ website.