Labor may need to refine an important aspect of its childcare policy. Extra subsidies to parents will not be of sufficient benefit to parents if they result in price hikes from childcare providers. The Australian Competition and Consumer Commission (ACCC) cannot be relied upon to prevent these price hikes, at least given its current suite of powers.
On ‘Insiders’ there was this exchange between Barrie Cassidy and Tanya Plibersek.
“CASSIDY: Can I just go back, one aspect of the child care policy that we discussed just previously – if you offer subsidies to 100 per cent, is that not an encouragement then to the child care centres to charge more?
PLIBERSEK: It’s very important that we work with the ACCC, both to pick up individual instances of child care centres price gouging or inflating their prices unnecessarily, but we also want to work with the ACCC to look across the child care industry, to make sure that we make the reforms that are necessary to prevent inflation in child care. We have seen a 28 per cent increase in recent years under this government in child care costs. Families can’t afford to see increases beyond that. We want to make sure that every dollar of this extra $4 billion that we’re putting into early childhood education and care goes to families, not to child care centre operator profits.”
Though sometimes regarded as a more effective regulator than the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority the ACCC has no power to prevent childcare providers increasing their charges in response to government increases in subsidies to parents.
Here is what the ACCC chair Rod Sims said in a 2018 in relation to the ACC’s role on market intervention on prices:
“…we are criticised by some in the community due to a perception that we have failed to act in the face of increasing petrol prices, or in respect of various forms of actual or perceived price gouging of the Australian consumer, as well not doing enough on behalf of particular small businesses who are seen to be suffering at the hands of larger businesses.
Enhancing competition does not mean protecting all market participants from failure, nor does consumer protection extend to shielding consumers from price increases set by the markets.
It is not illegal for a company to put their prices up, or even to price gouge, as this term is commonly understood. We largely work to establish an even playing field, where all participants have a fair chance of achieving either success or failure, and we work to ensure consumers are not misled.”
And in relation to high petrol prices consider this report:
“The chairman of the ACCC Rod Sims has echoed common Australian sentiments, saying that petrol prices are just too high. Unfortunately even the ACCC doesn’t have a clear course of action that can be taken to lower prices…Because overpricing goods isn’t actually against the law, there’s not much the ACCC can do…”
Labor is unlikely to be able to successfully rely upon the ACCC to control prices charged by childcare providers. It should only provide subsidies where providers have agreed not charge prices in excess of a scheduled fee set by the government. Alternatively, Labor will need to find some other effective mechanism to ensure all the benefits of the increased subsidies flow to consumers. It seems clear enough From Tanya Plibersek’s comment that this is Labor’s intention.
On Q and A on 29 April 2019 Chris Bowen confirmed the general principle that as government is subsidising childcare costs it should have a say in what the providers charge. But he acknowledged more work would be required with the ACCC on the issue.
Bill Shorten has already flagged the possibility of price controls:
“As we give the subsidies to parents, we don’t want the operators saying ‘mmm yummy, we like that $2000 subsidy and we’ll increase the cost of fees’,” Mr Shorten told the Nine Network. “If that doesn’t work … we will look into price controls like we do with health insurers. We want the money to go to parents.”
The Coalition government introduced a new system of childcare subsidies in July 2018. Its system set hourly caps on how much the Government pays, so if a centre charged more per hour than what the Government regarded is reasonable, parents have to pay the extra cost. The Coalition said it would “name and shame” any providers imposing extreme fee hikes after this change. Labor says the cost of childcare has risen by 28% under the Coalition so naming and shaming appears an inadequate response. The Coalition claims childcare prices went up 50% when Labor was last in government.