Cost of Living Package: More families to receive childcare support

The Government is easing cost of living pressures for the majority of New Zealand families by improving access to and the value of childcare assistance Prime Minister Jacinda Ardern announced today.

The Prime Minister also announced increases to the Working for Families Tax Credits that almost 60 percent of New Zealand families receive.

The latest policy in the Government's package of cost of living measures reverses a freeze on the income threshold for childcare eligibility that National put in place in 2010. By playing catch-up and indexing the income threshold to wage growth over 10,000 additional children are estimated to receive support.

"We're targeting one of the most significant costs for working families by making childcare and before and after school care more affordable to a greater number of low and middle-income families," Jacinda Ardern said.

"At a time when families are feeling the cost-of-living spike, we're investing in what matters most by making sure childcare is within reach for parents and they have more support to cover other costs.

"The policy means a family with two parents both working 40 hours per week on $26 per hour with two children under five who will not have been eligible for childcare assistance, now will be eligible for $252 per week from 1 April 2023.

"Research shows nearly 23 per cent of mothers report difficulties getting childcare while working or wanting to work. This policy helps remove that barrier and enables parents to enter the workforce to help fill labour shortages, so it's a win-win for families and the economy.

"It's also about restoring opportunities for children to get the best start in life. Evidence shows that participation in high quality childcare can reduce the impact of socio-economic disadvantage.

"The inflation adjustment of the Family Tax Credit will also provide a little extra relief for the majority of working families. Along with previous increases to the Family Tax Credit, a family with two children on a median family income for Working for Families recipients are now receiving over $1300 more a year since we took office. That climbs to over $3600 for families receiving the Best Start payment.

"Supporting New Zealand families with the cost of living is the top priority for the Government. This kind of targeted support not only reaches those who need it most but it won't have a significant impact on inflation and make the problem worse" Jacinda Ardern said.

"Making childcare more affordable will help to remove financial barriers to work, particularly for sole parents and those on low- to middle-incomes," Minister for Social Development and Employment Carmel Sepuloni said.

"Childcare assistance has been underinvested in for more than a decade since income thresholds were frozen by National in 2010. In Budget 2021, we started to reverse that by indexing Childcare Assistance to average wage growth going forward, but today's policy plays catch-up and reverses the freeze of the past 12 years.

"The policy will also help to address disparities in for Māori and Pacific mothers who are more likely to experience issues accessing childcare.

"For our tamariki, they'll also get the best start in life by participating in high quality early childhood education. This will help set them up on pathways into further education and create positive opportunities for them to engage in their communities in the long-term.

"The Government has overseen record numbers of New Zealanders entering the workforce. This policy will assist more parents, especially women, to have the opportunity to take up work.

"We're continuing to make significant progress on our welfare overhaul. This has included lifting core benefits to historic levels, reinstating the Training Incentive Allowance to support the likes of sole parents into work, allowing Child Support to be passed on to sole parents as well as investments made through the Families Package and our year-on-year increases to the minimum wage.

"There is still more work to do however, and that's why we've prioritised our Working for Families Review with a focus on how our system of tax credits can better support families on the lowest incomes, particularly working families. Making childcare more affordable is only one step along the journey, with our Review of Childcare Assistance currently ongoing.

"We're not shying away from putting families first and focusing on what matters most to New Zealanders, as we continue to deliver meaningful change in children's and families lives especially during these challenging times," Carmel Sepuloni said.

Notes to editor:

· These changes will take effect from 1 April 2023.

· Raising the income thresholds will result in:

• • parents of approximately 7,400 additional children receiving the Childcare Subsidy on average per month and
  • 2,900 additional children estimated to receive the OSCAR Subsidy in 2023/24 on average per month,
  • an overall increase of 36% in the number of children eligible for these subsidies.

· The policy will cost $189.391 million over four years to increase the income thresholds for MSD's Childcare Assistance subsidies.

· You can apply through the MSD website. If you don't currently receive payments from MSD, you'll need to complete the Childcare Assistance application form.

Scenarios:

Family 1 - a sole parent with 2 children aged 2 and 4 years

• Works 40 hrs per week on $26 p/hr, $1,040 p/w ($54,080 p/y)
• Based on the above assumptions needs 9.5 hours of childcare per day and 47.5 hours per week per child
• Eligible for the level 2 subsidy rate under current settings and the highest subsidy rate (level 1) under new thresholds

Family 2 - a sole parent with 3 children aged 2 years, 4 years and 6 years

• Works 40 hrs per week on $30 p/hr, $1,200 p/w ($62,400 p/y)
• Based on above assumptions needs 9.5 hrs of childcare per day and 47.5 hrs per week for the 2 and 4 year-old (and the 6 year-old during school holidays)
  • 6 year-old needs 17.5 hrs per week of childcare during school term
• Eligible for level 2 subsidy rate under current settings and the highest subsidy rate (level 1) under new thresholds

Family 3 - a couple with 3 children aged 2, 4 and 6 years

• Work 60 hrs per week on median hourly wage ($30 p/hr), $1,800 p/w ($93,600 p/y)
• Based on above assumptions needs 5.5 hrs of childcare per day and 27.5 hrs per week for the 2 and 4 year-old (and the 6 year-old during the school holidays)
  • 6 year-old does not need childcare during school term
• Eligible for level 3 subsidy rate under current settings and level 2 subsidy rate under new thresholds

Family 4 - a couple with 2 children aged 2 and 4 years

• Work 80 hrs per week on minimum wage ($21.20 p/hr), $1,696 p/w ($88,192 p/y)
• Based on the above assumptions needs 9.5 hours of childcare per day and 47.5 hours per week
• Eligible for level 4 subsidy rate under current settings and for level 2 subsidy rate under new income thresholds

Family 5 - a couple with 2 children aged 6 and 8 years

• Work 80 hours per week on a low wage $26 p/hr, $2,080 p/w ($108,160 p/y)
• Based on the above assumptions needs 9.5 hours of childcare per day and 47.5 hours per week in the school holidays and 17.5 hours of childcare per week during school terms
• Not eligible for any subsidy under current settings and eligible for level 3 subsidy rate under new income thresholds

Family 6 - a couple with 1 child, aged 3

• Work 80 hrs per week on low wage ($26 p/hr), $2,080 p/w ($108,160 p/y)
• Based on the above assumptions needs 9.5 hours of childcare per day and 47.5 hours per week
• Not eligible for any subsidy under current settings and eligible for level 4 subsidy rate under new income thresholds

Family 7 - a couple with 2 children aged 2 and 4 years

• Work 80 hrs per week on low wage ($26 p/hr), $2,080 p/w ($108,160 p/y)
• Based on the above assumptions needs 9.5 hours of childcare per day and 47.5 hours per week
• Not eligible for any subsidy under current settings and eligible for level 3 subsidy rate under new income thresholds