Tuesday, June 24, 2008

2 wrongs don't make a right.

Wrong #1: Government increases the ridiculous and unncecessary childcare rebate from 30% to 50%.

Wrong #2:After Australia's biggest childcare provider, ABC learning announces a 11% increase in fees, the federal gov't is making noises for them to "justify" their price increase and threatening to possibly use their powers against them.

THE Federal Government will use "significant clout" to make the nation's biggest childcare provider justify an 11 per cent hike in fees.

ABC Learning says its new fees, nearly three times the rate of inflation, will apply from July 1, the same day the childcare tax rebate rises from 30 per cent to 50 per cent.

Daily fees paid by parents with children at the centres will rise to about $62 a day from $56, or by about 11 per cent.

Notice I am not referring to ABC learning's decision to raise their prices as a wrong. After all, this is a free country, and they are free to do so. In fact, prices should adjust to help allocate supply and demand in any market in the world.

Clearly, with a bigger gov't rebate, the demand for childcare has increased. Given the same supply, either prices need to adjust upwards OR we experience more shortages of childcare.

Its the market, stupid !

By the way, most Aussies and media pundits don't think there is anything wrong with a gov't rebate (forcibly taking income earners property and handing it over to childcare centres) or with a government's powers to probe and regulate prices (not allowing providers the freedom to set their own prices ).

The only thing wrong with this whole scenario, according to most people, is ABC learning setting their own prices. They've always been free to walk away, nobody forces them into paying for child care. But I guess reality, reason and logic elude the discussion.