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Australia’s ACCC Finds Limited Evidence of Profiteering in Childcare Sector Despite Soaring Fees

 |  January 29, 2024

In a recent investigation into the childcare sector, the Australian Competition and Consumer Commission (ACCC) has uncovered limited evidence of profiteering by private operators, despite the noticeable surge in childcare fees. The comprehensive report, part of an inquiry directed by the federal government to assess the accessibility and affordability of childcare in Australia, revealed that one in four companies within the $17 billion industry recorded meager returns or operated at a loss.

Contrary to concerns raised by Education Minister Jason Clare, who had previously threatened to “name and shame” childcare operators engaged in price gouging, the ACCC found that most childcare providers were not making excessive profits. The regulator’s inquiry also dismissed suspicions of private equity players engaging in profit-shifting through property deals with related entities.

The report highlighted that larger private operators managed to secure higher profits by maintaining wages close to award rates and hiring less experienced teachers. While these practices were acknowledged as contributing to increased profitability, the ACCC stressed that the majority of childcare providers were not engaging in activities that could be deemed exploitative.

Read more: ACCC Warns Against Qantas-Virgin Duopoly

The scrutiny into the profitability of private operators arose following the federal government’s directive to the competition watchdog. However, the ACCC’s findings indicate that larger subsidies introduced by the government in the previous year significantly reduced the cost of childcare for households across various income spectrums.

According to the report, out-of-pocket expenses for center-based daycare witnessed an average decrease of 11%, outside school hours care costs dropped by 8.8%, in-home care costs by 12%, and family daycare costs by 13.8%. Despite the average daily fee for center-based daycare rising to $133.96 per child in the September quarter of the previous year, a 10% increase from the previous year, larger subsidies resulted in a notable 8% reduction in the daily out-of-pocket expenses for families, amounting to $44.42 per child.

These findings suggest that, while childcare fees have experienced an upward trend, the government’s intervention and increased subsidies have effectively mitigated the financial burden on Australian families. The report may prompt a reassessment of concerns over profiteering in the childcare sector, with implications for future policy decisions aimed at ensuring affordable and accessible childcare services for all.

Source: AFR