The $5 billion plan for families that Albanese could promise at the next election

Three in 10 Australian families would get free childcare and others would get greater discounts under a $5 billion road map unveiled on Wednesday that the government has signalled will form a centrepiece of its re-election campaign. The Productivity Commission’s report on the sector gives Labor a family-friendly policy that Prime Minister Anthony Albanese can take to the next election if he is prepared to lift childcare spending by 37 per cent, having already committed $11 billion to boost pay in the industry and attract staff. Almost a third of Australian families will get free childcare under a model proposed by the Productivity Commission.

Credit: Ryan Stuart Education Minister Jason Clare said the federal government would respond to the report’s recommendations in the next few months, which would be before an election due by May. “What this report says is that a universal early education system is one where every child gets access to three days a week, or 30 hours a week, of high-quality education and care, and that every parent can afford for their child to get access to that,” Clare said. “It sets out a roadmap for how we might be able to achieve that over the next decade or so.



” The report recommends families earning less than $80,000 have their childcare subsidy lifted to 100 per cent of standard fees – from 90 per cent, or $12.86 an hour, to $14.29 – while those with multiple children on incomes up to $140,000 should also receive the full amount.

Parents would get 1 percentage point less of the hourly rate for every extra $5000 they earn, in changes to simplify the system that would come in by 2026. The higher starting subsidy means almost all Australian families benefit from the new fee structure, with lower-income earners the biggest winners. The commission said the full package would cost taxpayers $17.

4 billion a year, compared to $12 billion currently. The added funding could boost childcare participation by 10 per cent and add 143,000 full-time workers to the labour market. The commission also wants the government to abolish the controversial “activity test” that limits how much parents get based on how many hours they work because it punishes families on lower incomes without boosting workforce participation.

But it rejected the idea of a universal $10 daily cap on childcare fees, which exists in Canada and was popular among advocates, but would benefit high-income earners the most. The biggest challenges to universal childcare were workforce and supply, the commission noted. It said the government should consider giving low-interest loans or grants to help new childcare centres open in regional areas or communities with complex needs.

The workforce would be bolstered by introducing accelerated qualification pathways and consistent registration requirements. It said the government’s 10 per cent pay rise for childcare workers – which lifts to 15 per cent for workers in centres that limit their fee increases in the next year – would help expand staff numbers. To help lower-income families, who were the most likely to benefit from childcare but the most likely to miss out, the commission said the government should create a new “inclusion fund” in 2026 that allocates extra money to childcare services where children or a community had higher needs.

The Centre for Policy Development, a left-leaning think tank, said the report gave the government an opportunity to create a truly universal early childhood system. “However, these measures represent small tweaks that fail to address the deeper systemic issues within the current funding models, such as access, affordability and complexity,” it said. The Parenthood, a lobby group for working parents, said it still wanted to see a $10 daily cap.

“Unless the government caps fees, they are going to keep going up, and the government will be pouring money into the childcare subsidy system without any substantive fee relief for families,” chief executive Georgie Dent said. Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter .

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