Beyond Inflation: The Adequacy of Out‐of‐Home Care Allowances in Australia

ABSTRACT Research Question This study examines whether home‐based (foster, kinship or relative) out‐of‐home care (OOHC) allowances in New South Wales, Australia, adequately reflect the contemporary costs of caring for children. Research Findings We find that real median expenditure among families with children increased by 23%–30% between 2006 and 2022, after adjusting for inflation and sociodemographic factors. These increases suggest that household spending needs have changed in ways not fully captured by CPI indexation. As a result, current OOHC allowance settings may understate the real costs faced by carers. Policy Implications The findings indicate that relying solely on CPI indexation may inadequately compensate carers and place pressure on the stability and sustainability of home‐based OOHC placements. The study proposes two alternative adjustment approaches that better align allowances with observed expenditure trends and provide a practical evidence base for policy reform. Methods Used We use longitudinal household expenditure data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey and estimate changes in median household expenditure using quantile regression. The analysis is descriptive and policy‐oriented, not causal.