On the ballot: The future of childcare in Australia

🧠 Why it matters:

Ninety percent of human brain development happens by age five. Access to affordable, high-quality childcare is critical — not just for kids, but for Australia’s future economy.

What’s happening:

• Labor is scrapping the “activity test” for subsidised childcare, starting January 2026.
  

• With those changes, households earning under $533,280 annually will be eligible for three days of subsidised care a week — regardless of work, study or volunteering hours.

Cost check:

• Labor estimates scrapping the test will cost $427 million over five years.

• The Productivity Commission, however, forecasts a much bigger price tag: $1.1 billion a year.

• Despite the cost, the commission still backed the removal of the test in its final report.

The Government’s stance:

• The Labor government believes scrapping the activity test will help low-income families the most. 

• Labor argues affordable and consistent childcare is critical for helping parents – especially women – return to work or study.

• Critics of the Coalition’s stance argue the Activity Test would trap those lower-income groups of the population in a cycle of under-or-unemployment. Under the Activity Test, not having a job would mean you are not applicable for the childcare subsidy. However, without childcare, it would also remain harder to get a job as you must look after your children.

• The government is pushing to a broader goal of pushing the country to universal, free childcare, treating early education as a fundamental public service.

The Coalition’s stance:

• The Coalition has pledged to reinstate the activity test if elected.

• It argues the test “rewards effort and aspiration” by linking childcare subsidies to participation in work, study and volunteering.
  
  🗣️ “Families working hard to create a better life for their children get nothing [under Labor’s plan],” said Angie Bell, the Coalition’s early childhood spokesperson.

The bigger picture:

• Who wins: Labor claims 66,000 families will benefit from scrapping the test and will look to continue improving access for Australians.
  

• Who loses: The Secretariat of National Aboriginal and Islander Child Care warns that reinstating the test, as the Coalition wishes, would disproportionately harm Aboriginal and Torres Strait Islander families. 

 🗣️“Removing the test has the potential for wider impacts, with recent studies showing interventions in ECEC [early childhood education and care] settings with vulnerable children and their families may be the key to reducing youth crime,” said Catherine Liddle, CEO of SNAICC.

• Economic upside:
  

  • Consultancy firm Impact Economics and Policy says nearly 40,000 women — could rejoin the workforce, as they’ll have time to search for work.
    

  • The GDP benefit could run into the billions of dollars, if barriers to childcare are removed, said Impact Economics and Policy. 

Its report: Child Care Subsidy Activity Test: Incentive Or Barrier To Labour Force Participation?

💬 The bottom line:

Scrapping the activity test is about more than just childcare bills — it’s a bet that early education access boosts long-term social and economic outcomes. The Coalition sees it differently, framing the change as an attack on aspiration and hard work.

🎥Watch the full report below