Scott Morrison has talked down the prospect of extending free childcare for another three months.
The prime minister said the $1.6 billion scheme, which ends on June 28, was never meant to be permanent.
“It was a measure designed for the times and, like all of our measures, we are constantly looking at them and applying them to the circumstances as we know them,” he told reporters in Canberra on Friday.
A decision is imminent with the improved health situation and gradual reopening of workplaces weighing strongly on the thinking of policymakers.
“I do know that the childcare facilities and parents themselves are keen to move back towards a more normal arrangement, which would enable greater capacity,” Mr Morrison said.
“With more people going back to work there are rising levels of demand, which was the issue some time ago.”
The sector had warned it was facing a crisis early in the pandemic as parents withdrew their children in droves.
Under the relief package for childcare services, the government guaranteed taxpayer subsidies at pre-pandemic levels – about half their income – but said they couldn’t charge parents any fees.
A review after a month of operation found three-quarters of services surveyed said the package was keeping them financially viable.
Parent advocacy group The Parenthood has warned returning to the regular system, which has a strict activity test, could wind up locking out many parents as unemployment levels stay high for years.