Government Pledges AU$3.6 Billion To Boost Early Childhood Educator Wages

The federal government has allocated AU$3.6 billion to resolve acute staff shortages in the early childhood education sector, which will be rolled out as pay hikes in stages.

The move will increase wages over two years, with a targeted 10% increase by December 2024 and an additional 5% increase by December 2025. It will also include outside school hour workers in the beneficiary list.

This salary boost is conditional on childcare center agreeing to a 4.4% fee ceiling over the next year, ABC reported.

"Early educators shape lives and change lives. We can never thank them enough for what they do – but we can make sure they are properly valued and fairly paid," Prime Minister Anthony Albanese said. "A pay rise for every early childhood educator is good for our workforce, good for families and good for our economy."

The decision came after "pattern bargaining" with the Fair Work Commission -- the first of its kind across the entire industry.

However, a former Reserve Bank of Australia (RBA) assistant governor contended the organization will frown on the federal government's proposal to raise childcare pay over fears that it will worsen inflation.

According to the RBA's caution, the heightened government spending could culminate in rising inflationary pressures on the economy, as it leads to a surge in overall demand and raises prices.

Concerns about inflation have led to the RBA board holding back on slashing interest rates.

"It's not enough to move the dial on their [inflation] forecasts, but the Reserve Bank does seem to be in a bit of a mindset at the moment that every single dollar of demand is a problem," Luci Ellis, the economic spokeswoman for Westpac, told the ABC's Insiders On Background podcast.

"Higher wages does mean more spending from more people, so that does mean at the margin the Reserve Bank will be thinking, 'well, that's a bit more demand from consumers,' even though they're only a small subset of consumers."