Caps on childcare subsidies for higher-income earners would be removed and costs slashed for families with two or more children under a $1.7 billion Budget proposal from the federal government.

The policy appears aimed at softening Labor’s attacks on the government over child care, but the Opposition is labelling the policy a “missed opportunity” for reform.

The aim is to reduce disincentives for parents to work more hours in a week.

Childcare subsidies are currently capped at $10,560, beyond which households with an income of more than $189,390 pay the full rate in childcare fees.

The new policy, to be included in next week’s Budget, will remove that cap.

Significant boost

Subsidies for families with two or more children will increase significantly, to a maximum 95 per cent.

The government suggests that change will benefit a quarter of a million families, by an average of $2,260 per year.

The changes are targeted at families with multiple children, based on an assessment that those families tend to bear proportionally higher childcare costs.

Treasury suggests the changes will boost GDP by up to $1.5 billion, through making it easier for parents to work more hours.

The Opposition detailed a more generous childcare policy late last year.

That policy would similarly scrap the childcare subsidy cap, but would go further in boosting subsidy rates for families earning up to $530,000.

The Coalition’s budget proposal is more targeted at low-to-middle income earners.

‘Fails dismally’

Labor frontbencher Brendan O’Connor said it would leave too many people out.

“It is too little, it won’t be sufficient to provide the support needed,” he said.

“Childcare costs are going through the roof, they are not affordable for families and this will not assist in improving employment participation for women in particular.

“So it doesn’t in any way steal the thunder of Labor, it actually fails dismally, to respond to a social and economic need in this country, and that is to make sure that child care is affordable for families.

“This does not pass that test.”

-ABC