Rising interest rates: what could affordability pressures mean for children’s access to early learning?

The Reserve Bank of Australia’s increase in the cash rate to 4.85 per cent brings renewed attention to how families balance family budgets, working hours and early learning costs. The increase of 0.25 percent adds to the financial pressures facing households.

With the RBA expecting higher interest rates to restrain household spending as inflation remains elevated, how is this continuing to impact families and childcare requirements.

For early childhood education and care (ECEC), the issue is how families will respond when their budgets may be tightening. Changes to paid work, informal care or booked days could affect ongoing enrolment pressures.

Family decisions could change demand

A family seeking to reduce expenses may consider fewer early learning days, help from relatives or different working arrangements. Others may need additional paid work to meet repayments, increasing their need for ECEC rather than reducing it.

Flexible hours or working from home could change when a family needs care, but neither automatically removes that need. The effect on an early learning centre’s occupancy would depend on how families’ decisions translate into booked places, alongside local demand and available capacity.

The 3 Day Guarantee was introduced to provide Child Care Subsidy-eligible families with at least 72 subsidised hours per fortnight, regardless of parents’ activity level, however how are the interest rates rises impacting family budgets.. 

Affordability also affects access to learning

The implications extend beyond parents’ employment and providers’ occupancy, quality early education can improve outcomes throughout children’s lives, particularly for children experiencing disadvantage and vulnerability, who are less likely to attend. 

Early learning gives children opportunities to build friendships and develop social and emotional skills. When costs lead families to reduce attendance, it could lead to children having a reduction in opportunities to take part in important developmental experiences with educators and peers. Affordability therefore starts to affect access to early learning as well as the family budget.

Read the RBA’s decision here and The Sector’s earlier coverage of interest rates and ECEC.