Anthony Albanese has set his sights on universal childcare in Australia as the reform he wants to be remembered by, saying it should one day be "as natural as public school". The ambition, likened by the prime minister to Medicare and the NDIS, now runs into the arithmetic: the childcare subsidy was projected to cost about $16.2bn last financial year, a figure slated to rise to $18.4bn by 2028-29.

What 'universal' means, and what it would cost

The government has defined universal childcare as care that is "available, quality and affordable" - deliberately not free. No overseas model has been adopted, but options on the table include provinces in Canada which offer $10 a day capped care, or Estonia, where fees are capped at low rates tied to the minimum wage; Labor has indicated any scheme is likely to be means-tested.

The productivity commission weighed in with its own advice. In June 2024 it recommended free childcare for families with a household income under $90,000, with the subsidy dropping per $5,000 income increase and tapering off at $580,000; a $168,000 household would receive an 85% subsidy. It also modelled a flat $10-a-day fee or a 90% subsidy for all families, but concluded the cost to the budget would be much higher and the benefit would disproportionately go to wealthier households.

Two consulting reports are now informing the cabinet's work. Deloitte is producing the larger of the two, costing childcare delivery across metropolitan, outer-suburban, regional and remote areas, and is due to hand the report to government by the end of the year. That exercise requires cooperation from about 1,000 childcare centres; with few volunteers, the government is compelling service providers to hand over the centres' financial data.

Families are already stretched by fee rises

The financing debate has a human edge. Rachel Hill, a Sydney mother of two who works in the not-for-profit sector, recently bumped up her workload from two days a week to full-time to try to cover ever-rising costs - only to find the extra pay swallowed by daycare. Her family's bill went from paying around $175 a week for four days of care to now paying $536 a week for five.

Hill said she had not wanted to return to full-time work and that the decision was driven purely by the cost of living; the extra pay now goes entirely on daycare. A third child, she said, financially just wasn't ever going to work for her family.

That is the view of Sydney mortgage broker Eshanee Collins, who described fees as comparable to private school fees.

The current subsidy settings explain part of the strain. A family with one child and household income of up to $88,520 receives a government subsidy covering 90% of childcare fees, tapering 1% per additional $5,000 of income to zero at $538,520. Labor says a family earning $168,000 with one child in care 30 hours a week is $7,440 a year better off than they would be without the higher subsidies it has raised since coming to power in 2022.

Yet childcare fees jumped 7.3% in the 12 months to August - more than twice the inflation rate. For families with three-year-olds, additional state preschool subsidies exist, but preschools run on school terms and typically offer 15 hours a week, leaving gaps for full-time working parents.

Who would run the centres

Beyond affordability lies the question of ownership. Cabinet is weighing a KPMG report on the business case for the government owning and leasing childcare centres, which the government has refused to release, citing cabinet in confidence rules. That work centres on the $1bn building early education fund for state governments and not-for-profits to set up centres in childcare deserts.

The fund's first grant round was announced this month: $17.3m split between three not-for-profit providers to build four childcare centres in outer metropolitan and regional areas, with dozens more grants yet to come. The direction matters because 70% of the sector is currently privately run, and the government wants not-for-profits to make up a bigger share.

Childcare minister Jess Walsh framed the goal: "Outer suburbs and regions where there are growing families, but not enough childcare places, we want to build more quality, not-for-profit early learning".

Recent events have sharpened the argument. In August, the for-profit provider Edge Early Learning went into administration, while G8 closed dozens of under-enrolled, underperforming centres. Goodstart Early Learning, a not-for-profit and fund recipient, this week signed an agreement to investigate the potential take over of up to 31 of Edge Early Learning's 64 centres.

But expansion has limits. Goodstart's head of advocacy John Cherry said "not-for-profit providers around the country are running on very thin margins and very challenged by operational conditions". On price, fees are about 8% cheaper at some not-for-profits per a childcare estimator comparison - though not-for-profits consistently have higher quality and safety ratings.

An election battleground in waiting

Childcare is shaping up as a key election battleground. The Coalition is looking at both the design of the childcare subsidy and paid parental leave settings, while One Nation promotes income splitting and policies encouraging one parent to stay home. The Greens have commissioned parliamentary budget office modelling on 50 hours a week of free childcare, which could cost $127bn over a decade.

The demographic backdrop adds urgency for Labor: the 2026 intergenerational report, released last month, projected deaths would outnumber births in Australia by the 2060s, and the party argues universal childcare is key to boosting births. The sector is also working to rebuild confidence after being rocked by widespread allegations of child abuse and safety breaches, damaging public trust, which prompted the government to tighten standards.

The next steps are now fixed: Deloitte's delivery report is due to government by the end of the year, alongside the cabinet's consideration of the withheld KPMG business case.