why is childcare so expensive in Australia?
anchored to the ACCC Childcare Inquiry final report (September 2024), the Productivity Commission Early Childhood Education and Care report (2024), and ACECQA workforce data.
Australian families pay roughly $130 to $200 a day for long day care in capital cities. After the Child Care Subsidy (CCS), a two-income household earning $150,000 still pays around $40 to $80 a day per child out of pocket. Between 2018 and 2022, ACCC found that out-of-pocket childcare fees rose around 20% — faster than wage growth and faster than headline CPI for most of that window.
This guide is the honest answer to why. It draws on the ACCC's Childcare Inquiry final report (September 2024), the Productivity Commission's 2024 ECEC report, and ACECQA workforce data — not opinion or rough estimates.
the headline finding: it's not one thing
The ACCC's 2-year Childcare Inquiry, commissioned by the federal government and reporting in September 2024, was the deepest look at how the sector prices itself in Australian history. Its central conclusion: there is no single cause. Childcare is expensive because labour, property, capital, and the subsidy design all pull in the same direction at once, and the market has very weak price competition to push back.
The ACCC also found that providers' margins are not the main story. Average for-profit operating margins were approximately 7-8%, and not-for-profit margins were thinner. The cost stack — not the markup — is doing most of the work.
the five cost drivers ACCC identified
labour — around 70% of operating cost
wages, super, and on-costs for educators are the dominant input. ratios are mandated (1:4 for under-2s, 1:5 for 2-3 year-olds, 1:11 for 3-5s) so providers cannot trade staff for cost. the 15% sector-wide pay rise staged through 2024-2025 lifted the floor further — necessary, overdue, and a permanent uplift to fees.
real estate, rent, and fit-out
centres need ground-floor floor space with outdoor area, accessible parking, and compliant fit-out. ACCC data showed metropolitan rents and freehold acquisition costs are a significant fixed cost driver, particularly in inner Sydney, Melbourne, and the ACT. centres in regional towns face the opposite problem: thin demand, no economy of scale.
regulation and quality compliance
the National Quality Framework — NQS ratings, ACECQA approvals, qualifications, programming, governance — costs real money to maintain. the ACCC explicitly noted these costs are worth it (Australia has high-quality care by global standards) but they are not free.
weak price competition
ACCC found parents choose centres on location, availability, and trust — not on hourly fee. waitlists and 'childcare deserts' mean parents take what they can get. providers therefore face limited downward pressure on price even when input costs ease.
debt-funded growth and capital cost
private equity and listed operators (G8, Affinity, Goodstart's not-for-profit model excluded) have rolled up the sector since 2010. ACCC noted that highly leveraged operators must service debt before they can lower fees. consolidation has not produced consumer savings.
the CCS feedback loop — does the subsidy push fees up?
This is the most politically uncomfortable finding in the ACCC report. When the "Cheaper Childcare" reforms lifted CCS rates from 1 July 2023, fees rose at a faster rate in the following year than they had in the year before. ACCC's observation: a meaningful portion of the increased subsidy was absorbed into higher fees, not passed through to households.
The mechanism is straightforward. The CCS expands what families can afford to pay. Providers do not face strong fee-based competition (point 4 above) so they can charge to what families can pay, not to a competitive price floor. The hourly rate cap ($14.63 in 2025-26 for centre-based day care) provides some ceiling on what is subsidised, but providers routinely charge above the cap — particularly in NSW and the ACT — and parents wear the gap.
The ACCC stopped short of saying the CCS "causes" high fees. Its position is more careful: the CCS is necessary for affordability, but in its current design it weakens the price signal that would otherwise discipline providers.
state-by-state cost variance
Childcare fees are not uniform. ACCC data on median hourly long day care fees, ordered most to least expensive:
| state / territory | long day care position | why |
|---|---|---|
| NSW | highest median fees | Sydney metro rents, high-income catchments, demand consistently outstrips supply |
| ACT | second highest | high household incomes, very low unemployment, tight supply |
| VIC | third — capital-skewed | Melbourne metro pricing pulls the median up; regional VIC is cheaper |
| WA | mid | mining-state wages support fee levels in Perth corridor |
| QLD | mid to lower | Brisbane similar to Melbourne; regional QLD significantly cheaper |
| SA | lower | Adelaide pricing well below east-coast capitals |
| TAS | lowest fees | low fees mask the real problem — childcare deserts and limited choice |
| NT | lowest fees, worst access | thin market, very limited supply, the cost shows up as inability to access |
ACCC Childcare Inquiry final report, supply-side and pricing chapter (September 2024).
centre type matters more than parents realise
The headline "cost of childcare" usually means long day care, but it's not the only option. ACCC and ACECQA data show meaningful cost differences:
long day care (LDC)
centre-based, 7am–6pm, the dominant model. highest median hourly fee. CCS hourly rate cap $14.63. roughly 67% of all approved care services. NQS-regulated, qualified educators, ratios mandated.
family day care (FDC)
small group care in an educator's own home. lower CCS cap ($13.55) and lower median fees but typical capacity is 4-7 children. ACCC found FDC has higher rates of compliance issues and the Department has tightened oversight since 2018. cheaper, more flexible, less standardised.
outside school hours care (OSHC)
before-school, after-school, and vacation care. lower CCS cap ($12.81). cheaper per session but cumulative cost across school weeks plus 12 weeks of holidays adds up to thousands per year.
occasional care
drop-in or sessional care, often community-run. fees vary. CCS eligibility is limited to approved providers — many community occasional care services operate outside the CCS system entirely.
in-home care and nanny
in-home care has a tightly capped CCS at around $37/hour but only around 3,200 places nationally. private nannies do not attract CCS. cheapest per hour for families with 3+ kids; uneconomic for one child.
the education-care divide nobody talks about
Australia treats childcare as one product from 6 weeks to 5 years. It isn't. The Productivity Commission's 2024 ECEC report drew this out clearly: a baby in the nursery room needs a 1:4 ratio, individual feeding, sleep, and nappy support. A 4-year-old in a pre-kinder room needs a 1:11 ratio, early-years curriculum delivery, and group-based learning.
The cost to deliver these is wildly different — but the fee parents see for both is roughly the same. Centres cross-subsidise nursery rooms (loss-making at the regulated ratio) with kinder rooms (where the higher ratio means a cheaper unit cost of supervision). When state governments fund free 3 and 4 year-old kinder, they effectively pull the most profitable age group out of the LDC stack — leaving long day care to recover its costs from younger ages.
This is why under-2s places are scarce and expensive, and why centres push hard to fill 3-5 rooms.
what ACCC recommended — and what's happened since
price transparency
ACCC recommended public, comparable fee data per centre. status: partially implemented. starting block.com.au lists fees, but coverage is patchy and not standardised. no national fee comparison register exists yet.
stronger subsidy guardrails
ACCC recommended monitoring fee increases that exceed input cost growth, with enforcement levers. status: not implemented. the federal government has signalled intent but no fee-cap mechanism has been legislated.
supply-side investment in thin markets
ACCC recommended targeted funding for childcare deserts (regional, remote, low-SES). status: in progress. the federal government's Building Early Education Fund ($1B over 2024-2027) is funding new centres in supply-constrained areas.
removing the activity test
ACCC and the Productivity Commission both recommended easing or removing the activity test, which excluded low-income and casually-employed families from full subsidy. status: implemented from 1 January 2026 as the 3 Day Guarantee — every child gets up to 72 hours of subsidised care per fortnight regardless of parental work hours.
workforce — wages and pipeline
ACCC noted educator wages were below the level needed to retain staff. status: in progress. the federal government funded a 15% pay rise staged through 2024-2025, conditional on providers capping fee increases. early signs are mixed: pay is up, fees still rose.
treating ECEC as universal essential service
the Productivity Commission's 2024 report recommended moving toward a universal entitlement to high-quality early learning — closer to schools than to a market. status: under consideration. the federal Labor government has signalled support; no legislation yet.
the honest verdict — is it likely to get cheaper?
No. Not in real terms. Three forces are pushing the headline fee up over the next 5 years:
- •wages keep rising — the 15% pay rise is the floor, not the ceiling. recruitment shortfalls in qualified educators will keep wage pressure on.
- •demand keeps rising — the 3 Day Guarantee from January 2026 brings more families in. existing supply cannot absorb it.
- •land and rent in metro areas keep climbing — particularly Sydney, Melbourne, ACT.
What may improve is the out-of-pocket cost for some households, as CCS expands and the activity test is removed. But the headline sticker fee is on a structural upward path.
Reform that genuinely lowers fees would require either supply breakthrough (a lot more centres, fast) or a fee-cap mechanism that resists the political backlash from for-profit operators. Neither is on the immediate horizon.
what parents can actually do about the cost
- •compare hourly fees, not daily rates — a centre at $14.50/hr is meaningfully different to $16.20/hr once you scale 50 hours/week × 50 weeks.
- •look for centres priced near or below the CCS hourly cap — fees above the cap are entirely your problem.
- •salary sacrifice into super to lower your assessable income — this can lift your CCS percentage and is one of the few legal levers.
- •use the 3 Day Guarantee from January 2026 — even casually-employed and stay-at-home parents now get 72 subsidised hours per fortnight.
- •consider family day care for under-2s — typically cheaper, smaller group, lower CCS cap but often a lower out-of-pocket too.
- •look at state-funded 4 year-old kinder programs — VIC Free Kinder, NSW Start Strong, QLD Free Kindy can replace a long day care day at very low cost.
sources
- ACCC — Childcare Inquiry final report (September 2024). accc.gov.au/inquiries-and-consultations/childcare-inquiry
- Productivity Commission — Early Childhood Education and Care final report (2024). pc.gov.au/inquiries/completed/childhood
- ACECQA — National Quality Framework Snapshot, workforce and ratings data (quarterly). acecqa.gov.au
- Department of Education — Child Care Subsidy hourly rate caps and reform timeline (2025-26). education.gov.au/early-childhood/child-care-subsidy
- Services Australia — 3 Day Guarantee, effective 1 January 2026.
related guides
childcare costs by city
average daily fees in Sydney, Melbourne, Brisbane, Perth, and more.
the gap fee explained
what you actually pay after CCS, with worked examples at 4 income levels.
the 3 day childcare guarantee
the new policy from January 2026 — how it works and who qualifies.
child care subsidy 2026
CCS rates, income thresholds, and the activity test in plain English.
this guide summarises findings from the ACCC Childcare Inquiry final report (2024) and the Productivity Commission's ECEC report (2024). it is general information, not financial advice. for your personal CCS rate, log in to myGov or call Services Australia on 136 150.