Why childcare costs could be set to rise

Parents returning to work in New Zealand are facing substantial childcare costs, with some families reporting annual bills of $15,000 to $20,000, and the industry warns that fees could continue to rise.

Rising Childcare Costs in New Zealand

Stephanie Pow, founder of Crayon, a company supporting parents’ wellbeing, said the cost of childcare and early childhood education is a significant financial burden for many families. “It’s equivalent almost to private school fees. A lot of them are parents who would not otherwise be putting their kids in private school. And that’s per child, so if you have twins or you have two or more young children, it multiplies from there.”

According to data, New Zealand is one of the least affordable countries in the world for childcare as a percentage of income. Two parents earning full-time average wages with two children in full-time daycare could spend more than a third of their income on childcare.

The average cost of early childhood education has increased over time, rising from $25.71 a week in 2007 to $85.18 in 2013, $95.45 in 2019, and $90.62 in 2023. Costs increased by 2.5% between the March 2025 quarter and December 2025.

The introduction of Family Boost payments in July 2024 led to a 22.8% decrease in costs during the same period the previous year. Family Boost covers 40% of a household’s childcare costs, up to $1560 for households earning up to $35,000 a quarter. Households earning between $35,000 and $57,286 a quarter can claim either 40% of their ECE fees or a maximum of $1560, minus 7 cents for every dollar earned over $35,000, whichever is less.

Early childhood education centres also benefit from the 20 Hours ECE scheme, which provides subsidies for up to 20 hours a week of childcare, or six hours a day. Some centres offer 30 hours through additional subsidies.

Costs Vary

The Office of Early Childhood Education reports that home-based education fees can range from $5 to $12 or more per hour. Playcentres are the most affordable option. Kindergartens receive more funding under the 20 hours scheme and can charge as little as $3 per hour for care beyond that. Most other centres charge between $5 and $8 per hour for children not receiving 20 hours funding.

Amanda White, a researcher at the NZ Council for Education Research, noted that costs can vary significantly. “Sadly this variation does exist, and can be very costly for some parents and whānau. High-quality ECE should be a public good for all children to access. A higher cost does not in any way reflect the quality of education children receive in a particular centre – there is no evidence that private centres offer better education/care than non-profit ECEs like community-based and kindergartens.”

Teacher qualifications, teacher-child ratios, and group size are critical factors in determining the quality of early childhood education.

Fee Warning

The Early Childhood Council, representing childcare operators, warned that costs are likely to increase, or more centres will close, if changes are not made. Between March 2022 and July 2025, 443 centres closed due to pay parity requirements and “sustained underfunding.”

A Ministerial Advisory Group was established in June to review funding for early learning. A review paper noted that the 20 hours scheme was intended to be regularly reviewed to adjust funding to reflect the increasing cost of providing care. However, it also noted that claims that funding doesn’t cover costs are largely anecdotal.

Simon Laube, chief executive of the Early Childhood Council, said there has been an 11.5% gap between subsidy cost adjustments and inflation since 2019. “We’re saying to the Government that they need to, to try and just keep the lights on, put a bit more money into the system.”

Laube added that if the budget doesn’t include a significant cost adjustment, parents will likely face increased fees, or more providers will be forced to close. The trend is shifting towards losing more centres than opening new ones, which is not in the best interest of parents.

Centres are sensitive to changes in the job market, as changes can affect the number of parents staying home. Laube also stated that increasing fees could lead to decreased enrolments, creating a difficult situation for providers.

The funding review needs to consider centres’ ability to pay higher salaries, as teacher increments are not covered by current government funding.

Despite these challenges, some centres are profitable. Childcare charity Best Start reported a profit of $32 million in 2023.

Occupancy Questions

Pow said parents are already finding it difficult to secure childcare places. “When we’re coaching parents we often tell them they should look into it 12 months or more before they intend to put their child into care because it can be so difficult to get a spot. There are a lot of wait lists and you don’t want to be in a position where you return to work and you haven’t secured childcare or weren’t able to get your first preference.”

Laube said occupancy rates are highest in areas like Canterbury, where centres can be up to 80% full. Auckland, however, has a surplus of providers, although data suggests thousands of children in Auckland do not participate in early childhood education.

Otago University economist Murat Ungor emphasized the importance of investing in early childhood education. “ECE plays a critical role in human capital development… Investing in these early years helps break cycles of poverty, reduce inequality, and boost long-term productivity.”

Recent UNICEF reports rank New Zealand fourth lowest out of 36 OECD and EU countries for child wellbeing, and lowest for mental wellbeing, highlighting the urgent need to prioritize early investment in children.

Examples of childcare costs (as of the source date) include: Khandallah Nursery School ($452.40/week), Chelsea House ($150/week), University Kids Fairlee Terrace ($474.64/week), Krafty Kidz ($105/week), High Five Early Education Centre ($275/week), Busy Bees Westgate ($236.60/week), Little Minds ($584/fortnight), Kindercare Belmont ($218/week), Busy Bees Daycare ($136.50/week), Royal Oak Childcare Centre ($115/week), Grey Lynn Kindergarten (free), and BestStart Ponsonby ($254/week).