These ASX childcare shares slumped despite Budget news

These ASX childcare shares, like G8 Education Ltd (ASX: GEM), fell lower after the government handed down its budget for the financial year.

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Childcare ASX shares G8 Education Ltd (ASX: GEM) and Think Childcare Ltd (ASX: TNK) shares fell today after the federal government handed down its budget for the next financial year.

Despite the government committing an extra $1.7 billion to the sector over the next 3 years, investors sold off their ASX childcare shares during today’s trading session.

By the market’s close, G8 Education shares were selling at 99 cents each (down 1.98%) and the Think Childcare share price slumped 0.32% lower to $3.08.

Let’s take a closer look at what the government is planning for the sector.

Childcare funding up

From July 2022, childcare subsidies for Australian parents will be expanded so that those with two or more children in daycare will receive a 95% subsidy. Those with one child in daycare will receive a 65% subsidy. As well, the $10,000 payment cap for high-income families will be abolished, meaning more upper-income families will receive government childcare rebates.

Prime Minister Scott Morrison, however, told this morning’s Sunrise program the start date could be moved forward. The PM said the current start date is due to issues involved in setting up a new payment system.

“If that [setting up the new payment systems] can be done sooner…we will certainly move on that,” Mr Morrison said.

Furthermore, today reported Treasurer Josh Frydenberg told reporters during budget lock up the delayed date was due to IT concerns.

“…There are technical issues…with regard to changing IT and computer systems,” Mr Frydenberg was quoted as saying.

Certain caveats will still exist for parents wishing to access the scheme. Namely, only children under 5 will be eligible and the 95% rebate will drop for a second child in care once the older one enters primary school. After school programs are also not covered.

In his speech to parliament last night, the Treasurer said the average family would be “$2200 better off” under the new scheme.

Investors in ASX childcare shares, though, appeared unimpressed. This is in contrast to some ASX aged care shares, which surged following last night’s Budget.

ASX childcare share price snapshots

Over the past 12 months, the G8 Education share price has increased by around 6% while Think Childcare shares have ballooned by 278%.

The beginnings of the COVID pandemic saw ASX childcare shares collapse as many families pulled their little ones out of the centres. Shares rocketed back when the federal government temporarily made childcare free as one of its many economic responses to the crisis.

G8 Education has a market capitalisation of around $840 million and Think Childcare is valued at approximately $189 million.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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