A $3.6 billion government wage subsidy for childcare workers is set to expire, sparking concerns over major fee increases for families. Providers say the scheme has helped stabilise the sector, but without an extension, costs could rise sharply by late 2026.
The Australian childcare sector is bracing for significant financial pressures as a federal pay top-up scheme approaches its expiry. The programme, which has provided vital funding to improve educator wages, was introduced as part of a government strategy to retain staff and cap fee increases for families.
The future of this support remains uncertain, with key stakeholders warning that without a government commitment to extend the scheme, many providers may be forced to pass higher wage costs onto parents.
Educator wage grants helped stabilise sector
In late 2023, the Federal Government introduced a $3.6 billion grant scheme to help childcare providers offer a 10 per cent pay rise in 2024 and a further 5 per cent in 2025. In return, providers agreed to cap their fee increases. According to News Corp Australia, by mid-August 2025, around 60 per cent of eligible providers had applied for the grant, accounting for 90 per cent of eligible workers in the sector.
Large operators such as Goodstart Early Learning and for-profit group G8 Education are among those who enrolled. Goodstart’s CEO Ros Baxter described the initiative as a “huge success,” noting a 36 per cent decline in job vacancies and a more stable workforce. “A more stable workforce means better quality early learning for children,” she told The Sunday Times.
Applications for the scheme opened in October 2024, but providers have criticised delays in approvals, with only 60 per cent of applications processed by mid-2025. The current scheme is due to expire in December 2026, leaving uncertainty about how future wage rises will be funded.
Fair Work ruling could trigger major cost increases
In April 2025, the Fair Work Commission issued a draft ruling recommending a permanent 23 per cent pay increase for most childcare workers. While the Government had not committed to covering the full cost, its legal team proposed phasing in the increase, reaching 15 per cent by the end of 2026, with remaining rises postponed until mid-2028.
Wages make up approximately 70 per cent of operating costs in early childhood education, and providers say they cannot absorb such increases without passing them on to parents. This could lead to fee hikes of between 10 and 15 per cent unless further government assistance is announced.
According to Annabel Brown from the Centre for Policy Development, the Government may be considering a short-term extension of the existing retention payments while it develops a longer-term funding model. Minister for Early Childhood Education Jess Walsh stated the grants were already “paying big dividends” by improving staff retention and quality of care.
As the sector awaits a final decision from the Fair Work Commission in October, the prospect of higher childcare costs remains a pressing concern for families across Australia.
