Childcare providers and staff are warning parents who have lost work because of the coronavirus pandemic won't be able to afford fees once they start again in a month.
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The government is ending its emergency free childcare package on July 13.
In a move that surprised the sector, it will also end the JobKeeper wage subsidy.
Instead, there will be a $708 million transition package worth a quarter of the sector's pre-crisis revenue.
The wage subsidy was worth about a third of fees to those services that could access it but not all were eligible.
The union covering childcare educators says the decision puts thousands of jobs on the line.
"Demand will drop again once parent fees are reintroduced in a few weeks, beginning another spiral of instability," United Workers Union early education director Helen Gibbons said on Tuesday.
And the nation's largest childcare operator, Goodstart, says half of its nearly 60,000 families have had their income slashed since February.
It says while an easing of the activity test that determines how much subsidised childcare a family can access is welcome, parents will still have to find the money to cover the out-of-pocket fees.
"There have been a lot of two-income families become one-income families or one-and-a-half income families and that really has knocked around where they will stand in terms of being able to afford child care," Goodstart chief executive John Cherry said.
There is also widespread concern about the impact unaffordable childcare will have on women getting back to work.
Women have lost more hours and work than men over the past few months as sectors such as retail and hospitality closed down.
"If women cannot get back to work, not because there is no job for them, but because they can't get early education and care, that will be an absolute travesty," Labor's early childhood spokeswoman Amanda Rishworth told reporters.
"It will be a job crusher for those women."
Labor has accused the government of breaking a promise after the prime minister said on Friday people could count on JobKeeper being in place until the end of September.
Pressed on this during a Senate committee hearing, Finance Minister Mathias Cormann said the transition payment was a fairer way to spread support across the whole sector.
"We are replacing one form of support, which was always temporary, with a different form of support, which for that sector is fairer and more equitable," he said.
Australian Associated Press
