Education Minister Jason Clare has warned childcare centres that hike fees to cover subsidy increases will be in the sights of the consumer watchdog.
The federal government's childcare subsidy will be increased from July 1, leading to bigger rebates for more than one million families.
While the subsidy rise should mean a reduction in out-of-pocket fees for parents, concerns have been raised that the savings will be swallowed up by childcare centres increasing their fees to cover increasing costs.
Mr Clare said the Australian Competition and Consumer Commission was monitoring for unreasonable price rises.
"The ACCC is watching childcare providers right across the country at the moment, making sure that they're not taking advantage of this or the changes that we're making," he told Seven's Sunrise program on Friday.
"If (childcare centres) are, the ACCC is ready to make recommendations about what further action we should take in that area."
It comes as the consumer watchdog is set to hand an interim report on its inquiry into childcare services to Treasurer Jim Chalmers on Friday.
The final report will be handed down in December, following talks with industry stakeholders after the childcare subsidy changes come into effect.
Deputy opposition leader Sussan Ley said parents would still end up paying more for childcare in the long run despite the subsidy changes.
"The subsidies that we're talking about that come in tomorrow are being eaten up by increases in fees, and that's what I'm seeing all around me," she said.
"Parents are not necessarily going to find that they're paying less."
Mr Clare said the government was looking to see whether Medicare-style universal childcare was a possibility in the future.
"We want to see what we can do here to make sure that we've got a universal early education system so all children get a great start in life," he said.
"This isn't babysitting. This is early education, and the more time in early education, the better prepared you are for school."
But Ms Ley said while universal childcare was a good idea, funding it would be difficult.
"He's promising free childcare in the future where we can't even get cheaper childcare now," she said.
"A universal scheme, who's going to pay for it? Is this government going to have to raise taxes to do that?"
