Chapter 5Funding for early childhood education and care
5.1Throughout the course of the inquiry, the committee heard that the current funding model for the early childhood education and care (ECEC) sector is fragmented, complex and insufficiently tailored to the needs of particular children, families and communities. Further, there is ‘a lack of coordination and stewardship compounding issues of supply and demand’, particularly in areas of over- and under-supply. There are also questions about whether significant investments in ECEC have led to improved developmental outcomes for children.
5.2Current funding initiatives from the Australian Government for the ECEC sector include:
Child Care Subsidy payments;
The Worker Retention Payment (discussed in Chapter Three);
The Building Early Education Fund, which provides capital funding to expand or build new ECEC services in areas of need, including capital funding to the states and territories for services on or near school sites, and $500 million set aside for the Australian Government to build, own and lease ECEC services;
The Community Child Care Fund, which provides grants to providers and services to address barriers to ECEC participation, particularly for regional and remote areas, Indigenous communities, and services in areas experiencing disadvantage; and
The Inclusion Support Program, which funds ECEC services to include children with additional needs.
5.3The Australian Government has also funded a review by Deloitte into the costs of delivering ECEC through the Early Education Service Delivery Prices project. The project is examining key areas required to deliver safe and quality ECEC, such as property costs and utilities; identifying additional costs of service delivery for higher-needs cohorts; and calculating the reasonable cost of providing safe and quality ECEC service delivery.
5.4A consistent theme in evidence to the committee was that, despite significant public investment in early childhood education and care, many families experience the system as rigid and limited in the types of care it supports. Several submitters argued that current policy settings overwhelmingly favour centre-based care, with other forms of care either unsupported or only available in limited circumstances. As a result, families whose needs are not well suited to centre-based models may face reduced workforce participation or be forced into arrangements that do not align with their child’s needs or their family circumstances.
5.5Childcare Choice submitted that, for many families, ‘the current system presents a single viable pathway: centre-based childcare’, and that where this model does not suit, ‘the choice becomes stark: use the system, or leave the workforce’. Similarly, Parents Work Collective emphasised that a more flexible system should support a broader range of care arrangements, including in-home and individualised care, particularly for very young children, noting that the current system is ‘rigid’ and does not adequately reflect the diversity of family needs.
5.6The committee also heard evidence that some parents seek care models that allow greater proximity to their children, particularly in the first years of life. BubbaDesk submitted that many parents are not ready to be separated from infants and require care arrangements that support breastfeeding, attachment and flexibility, which are not readily accommodated within existing subsidy settings.
5.7Lived experience evidence provided to the committee reinforced these structural concerns. One parent described being unable to continue shift work after losing access to informal care that was not supported by subsidies, while another reported withdrawing a child from centre-based care following safety concerns but being unable to afford alternative arrangements. These examples highlight that the design of the system can have significant consequences for workforce participation, family wellbeing and perceptions of safety.
5.8Taken together, this evidence suggests that, while centre-based care is appropriate and effective for many families, a system that predominantly supports a single model may not deliver genuine choice. A more flexible approach that recognises a broader range of care types may better support families, particularly those with non-standard work arrangements, very young children, or specific safety concerns.
5.9This chapter examines the key issues raised in evidence about funding for, and choice within, the ECEC sector, including issues raised about:
Different funding types, such as supply-side, needs-based and targeted funding for thin markets;
The Inclusion Support Fund;
Differences between for-profit and not-for-profit providers, and the role of rental fees; and
Flexibility and lack of choice, including proposals to broaden the current system, reform in home care and expand Paid Parental Leave.
Different funding types
5.10Funding for the ECEC sector is both demand driven, based on children enrolling in a service, and supply driven, in areas with thin markets where further support is needed.
Needs-based funding
5.11The Productivity Commission in their inquiry into early childhood education and care recommended that the Australian Government develop and implement a new needs-based Early Childhood Education and Care Inclusion Fund by 2028, with a Disability and Complex Needs Inclusion Stream, a Mainstream Inclusion Stream, and a program for services to apply for support for upgrades to physical facilities so ensure all children can be included, regardless of their abilities.
5.12Some evidence called for needs-based funding to take into account socio-economic differences, children with higher needs and remote communities. For example, Social Ventures Australia identified a gap for a needs-based funding model for ECEC, arguing that ‘there is no nationally consistent needs-based mechanism to address early childhood disadvantage across ECEC, particularly for children under age three’. They proposed that needs-based considerations be ‘built into funding of early years services to ensure adequate, flexible funding for the full operational cost of ECEC service provision (through both fees, subsidy and equity loadings)’. They suggested that reforming ‘the funding model to needs based funding from birth would have significant outcomes for children in those early years and see more thriving by the time they start school’.
5.13The Front Project told the committee that ‘the prospect of needs-based funding, of paying loadings for children with factors that require them to have a higher intensity of adult support or a more enriched environment…. will make it more attractive for providers to go into more disadvantaged areas’. Their Chief Executive Officer argued that ‘all public school systems invest more money in putting more staffing and more resourcing into schools experiencing disadvantage’ and there is ‘a recognition that it costs more’. Because we ‘don’t have a way of providing extra funding to our lowest income services… you see childcare deserts in our poorest areas and why provision in those lowest areas is predominantly not for profit’. She considered needs-based funding could be provided either through cash or actual supports, such as coaching.
Inclusion Support Program (ISP)
5.14The Inclusion Support Program (ISP) funds ECEC services to include children with additional needs.
5.15The committee received significant criticism concerning the adequacy of the Inclusion Support Program for children with disability, including that the process is too administratively burdensome and the ISP is underfunded. Further criticisms included that it is not meeting the needs of children, not supporting educators to deliver safe, high quality ECEC, there are long wait times, it does not cover the costs associated with inclusive early childhood education, and has not increased in line with CPI or minimum award rates for educators. In addition, the program previously capped subsidies at 25 hours per week for an individual child, despite children being enrolled on average for longer hours.
5.16Ms Skye Kakoschke-Moore from Children and Young People with Disability Australia pointed to ‘debate and reform speculation’ about the ISP ‘for many years now’, arguing this ‘indicates that, while the program was designed in one way, it’s not achieving the outcomes that either the government or families were hoping for’. In particular, families often do not understand how the program can benefit their child ‘and it’s not clear to them whether or not the funds that the centre is receiving are being spent towards programs or adjustments or additional support that their child needs’. She called for greater ‘communication between centres and families about how the funding is being used and how that’s going to benefit the children there’.
5.17Ms Natalie Dabarera from the United Workers Union noted that because the hourly rate for the ISP is less than the award rate, providers then have to use their own funding to pay for the additional educator. As a result, ‘sometimes for-profit providers may not want to provide that additional funding’. Ms Taj Al-Thifairy, also from the United Workers Union, noted that there are additional hours educators put into liaising with families and external healthcare providers and creating resources, that the ISP does not cover.
5.18Outside School Hours Council of Australia submitted that ‘the actual cost of an inclusion support educator is almost double the cost of the ISP funding subsidy as the cost of care has risen over time, while the funding has not been indexed’. Lady Gowrie Qld argued that ‘current inclusion support funding is not keeping pace with demand’, pointing to the ‘increasing enrolment of children with additional needs’. They called for flexible funding to support additional inclusion educators if needed, and models to account for the intensity of need.
5.19Some submitters considered that addressing the ISP is urgent and/or should be a priority for the Australian Government. Outside School Hours Council of Australia urged ‘immediate action to address the insufficient ISP payment’ and action to address ‘the substantial delays in processing claims’, arguing that ‘the lack of funding for inclusion support is putting children and educators at risk and must be addressed with urgency’. They considered that the ‘childcare sector cannot wait for another review or broader reviews such as the Service Delivery Prices Project to take action or children will ultimately be put at risk’.
5.20The Productivity Commission in their inquiry into ECEC recommended immediate changes to the Inclusion Support Program, including funding to increase the hourly subsidy rate, and removing limits on the weekly hours to align with the child’s attended hours. They also called for the Australian Government to investigate delays in processing applications. The Productivity Commission proposed the Australian Government develop and implement a new needs-based Early Childhood Education and Care Inclusion Fund by 2028, with one stream for children with high support needs.
Supply-side funding
5.21The Australian Competition and Consumer Commission (ACCC) conducted an inquiry into the market for the supply of childcare services, with their final report presented in December 2023. The ACCC found:
Market forces alone are not meeting the needs of all children and households;
Historically when subsidies increase, out-of-pocket expenses decline initially but then tend to revert to higher levels;
The design and implementation of the Child Care Subsidy (including its hourly rate cap) has had only limited effectiveness in placing downward pressure on fees and constraining the burden on taxpayers, whether for long day care, family day care, outside school hours care (OSHC) or in home care; and
Policy initiatives that continue to apply a ‘one size fits all approach’ across the sector will leave some communities under-served, unserved or without sufficient and appropriate access to childcare services.
5.22Minderoo Foundation/Thrive by Five suggested that ‘there are many benefits of supply-side funding models. Governments generally have better control over safety, quality, affordability and access than with demand-side funding models’. The Centre for Policy Development noted some Australian states and territories require preschool providers not to increase fees more than is reasonably necessary, and, as a condition of supply-side funding, impose reporting and monitoring requirements.
5.23Some submitters expressed support for supply-side funding to address market issues in disadvantaged, underserved and regional, rural and remote communities, including, in some instances, by making this funding ongoing. Community Early Learning Australia pointed to areas in Australia with low supply of ECEC services or no supply at all, arguing that being ‘able to deliver small supply-side-funded services for, let’s say, 20 to 30 children would see an enormous difference, and that’s where a market won’t go’. They noted that the Australian Government has begun to move into this space through the Building Early Education Fund in terms of capital, but it then ‘requires the supply side funding that enables that service to operate at a level of high quality in areas of low population’.
Targeted funding for thin markets
5.24Related to this was evidence pointing to ‘childcare deserts’ in low-income, outer suburbs of major cities, and regional, rural and remote areas, on account of the current system providing no or very limited additional funding.
5.25Lady Gowrie Qld argued that the Child Care Subsidy’s focus on affordability for families leads to ‘structural gaps’ in regional and rural services. In particular, funding ‘models that assume high enrolment numbers are unsuitable for small regional, rural, or remote services where lower population density makes economies of scale impossible’. Outside School Hours Council of Australia noted that ‘there are some federal government grants available’ for rural and remote settings, but these ‘are not necessarily fit-for-purpose, designed largely to facilitate access to ECEC rather than OSHC services, and offering grant funding largely for capital works… rather than for staffing and resource costs’.
5.26Longreach Regional Council considered that the ‘funding landscape for regional childcare has been marked by uncertainty and short-termism’, with the current model, reliant on grants, not providing ‘the stability required for effective long-term planning’. The Council called for longer-term, recurrent funding arrangements of ‘ideally five years or more’ to ‘enable effective planning and service continuity’. The Local Government Association of Queensland also flagged a lack of access for local governments to ‘stable, long-term funding to maintain services’, and called for ongoing ‘operational and capital support through direct block grants to sustain services despite fluctuating demand’. They also called for funding to ‘reflect the true cost of service delivery in remote areas, where small and variable enrolments make services financially unviable under current models’.
5.27Some evidence noted increased competition for the Community Child Care Fund, with a number of providers who relied on the funding missing out in the July 2024–June 2026 round. The Remote Area Planning and Development Board called for consideration for ‘an increase in the value of the funding pool’.
5.28Proposals to address issues with thin markets included place-based adjustments to the Child Care Subsidy, tiered loadings for regional, rural and remote settings, support for the Productivity Commission’s recommended ECEC Development Fund to assist not-for-profit providers in thin markets, block-based funding for small, regional areas, where there may be lower enrolment numbers or limited use of ECEC services, and funding to ensure all services can operate a minimum of two staff without operating at a loss, given many regional and rural services operate on a single staffing model to ensure viability. The Australian Childcare Alliance also called for a Market Stewardship role to coordinate planning across all tiers of government to prevent oversupply and thin-market failures.
5.29Other proposals included investment in models particularly used in thin markets, such as in-venue care and family day care, while the Australian Services Union called for the Australian Government to increase grant funding for regional local government ECEC programs, given these are often a provider of last resort.
5.30In the area of OSHC in particular, the National Outside School Hours Services Alliance called for guaranteed OSHC in all school communities and support for flexible models such as mobile or shared services for smaller communities, while the Federation of Parents and Citizens Associations of New South Wales proposed a grant program to encourage establishment of not-for-profit OSHC services in underserved areas particularly.
5.31 SNAICC – National Voice for Our Children called for the Australian Government with the states and territories develop and fully implement ‘a dedicated supply-side, needs-based, reliable and sustainable funding model for early years’ Aboriginal Community Controlled Organisations (ACCOs), along with ‘comprehensive sector scaffolding and backbone support’. They also proposed that 20 per cent of unallocated funds in the Building Early Education Fund be used ‘to build and establish new ACCO integrated early years services’. Ms Catherine Liddle from SNAIC suggested that without investment in services themselves, investment in other areas will ‘not hit the gains that they should. It’s almost like a car. There’s no point in getting a new engine in your car and thinking it’ll function if you don’t pay attention to the fact that the fanbelt might not be working’.
For-profit versus not-for-profit providers
5.32Some evidence focused on data indicating that for-profit services proportionately are more likely to have lower quality ratings, with some submitters arguing that some for-profit providers prioritise may financial performance over other metrics. Some submitters considered that some private for-profit providers may be reducing costs in areas that directly reduce quality and safety, including by reducing staff hours, hiring lower-qualified staff and limiting training.
5.33Further, the committee heard that the need for for-profit centres to generate profits may lead to low-income, outer metropolitan and regional, rural and remote communities being underserved and create ‘childcare deserts’. It may also lead to for-profit OSHC providers choosing not to offer vacation care at a particular school because it often has slimmer profit margins than before and after school care.
5.34The committee received evidence arguing that current funding models have ‘skewed the rapid expansion of services towards private for-profit services’. Some submitters were critical of a market-based model of ECEC provision, with the University of Queensland noting, for example, that ‘ECEC is the only education sector in which profit generation is both allowed and encouraged’. The Australian Education Union argued that public subsidies for private ECEC services ‘has led to the emergence of ECEC providers as an increasingly popular asset class for investors in recent years’. Further, ‘the subsequent increased involvement of large investment funds in the ownership of groups or chains of providers has made identifying chains of ownership and related providers increasingly difficult’.
5.35The Centre for Policy Development considered that without ‘active government stewardship and funding tied to quality improvement, the system risks entrenching disparities, with children in for-profit settings systematically less likely to access the highest-quality education and care’.
5.36Parents Work Collective pointed to Canada, arguing that the ‘Canadian government has identified that it is a poor and inefficient use of taxpayer funds to continue heavily subsidizing a sector to the point of universal access when it is largely owned by private entities that keep raising their fees in line with subsidy increases. They reported that the Canadian government ‘plans to constrain the growth of for-profit centres by legislating caps on their profits, auditing spending, and restricting public funds that are funnelled into them’.
5.37Others, however, supported a mixed market. For example, the Productivity Commission noted studies indicated that having a mixed market can lift the quality of all providers in an area and they ‘didn’t see a reason why the current process couldn’t continue’.
5.38In the OSHC sector, the National Outside School Hours Services Alliance suggested that ‘private for-profit providers often employ practices that undermine quality and create unsustainable competitive environments’, such as offering ‘inflated rental payments or incentives to secure service contracts with schools’ which then lead to an impact on quality to cover school payments. However, the Outside School Hours Council of Australia considered that ‘narratives that focus on the ownership structure and financial status of providers is not helpful and a misdirection’.
5.39The Victorian Government considered that ‘increasing reliance on private delivery of ECEC has led to market failure and poor provision’. They proposed ‘moving away from a passive approach that provides subsidies and runs grant programs but largely “lets the market run”‘. They considered ‘a system with broad targets for market share between privately owned for-profit, not-for-profit, local government and state or Commonwealth owned and operated services’ would ‘uplift quality and access’.
5.40The committee also heard evidence indicating that many for-profit organisations have good safety records. The Australian Childhood Foundation noted that ‘many private operators deliver excellent care’ while also stating that ‘the incentive structures inherent in a for-profit model can, if not checked, have adverse effects on quality and safety’. The Foundation suggested that not-for-profit ‘and government providers, by virtue of their missions, often re-invest surplus into quality improvements’, but some ‘corporate providers do choose to go above ratio or provide additional services… because they market themselves on quality, which shows even in a market system, there can be a competitive drive toward quality, not just lower costs’.
5.41The Front Project noted that while the ECEC system has been expanding, the for-profit sector has been ‘willing to take on the capital risk of growing’. Their Chief Executive Officer acknowledged that the community-managed not-for-profit sector, given it is typically connected to a local community, has not been ‘very interested in expanding’. She considered ‘there’s something about the risk appetite for not-for-profits that is different’.
5.42Guardian Childcare & Education called for an end to ‘the demonisation of for-profit early learning’, noting ‘there are both excellent and poor providers in the not-for-profit and for-profit areas of the sector… In reality, great organisations that thrive typically do so because they are passionate about what they do. Revenue success and profits are a byproduct of that’. They suggested that without ‘viable for-profit centres in the sector, the drain on the public purse would likely become progressively worse and, over time, quality and supply could become a major risk’. Guardian suggested there is ‘an ideological mindset against for-profit centres that could ultimately result in the loss of high-quality centres that are loved and valued by children and families’.
5.43Affinity Education Group argued that for-profit provider contributions to the market have helped meet demand quickly, while G8 Education contended that all ‘providers, regardless of ownership model, operate under the same robust regulatory framework and should be assessed by outcomes and compliance history, not ownership structure’. Guardian Childcare and Education pointed to issues it considered may be influencing data differences between for-profit and not-for-profit providers, including that newer centres ‘are far less likely to secure Exceeding in their first five years of operation… More than 90% of centres in their first five years of operation are for-profit centres’.
5.44Some evidence argued that not all providers should be grouped together when distinguishing between for-profits and not-for-profits. For example, the Australian Childcare Alliance suggested that ‘public discourse often oversimplifies the broad diversity that exists within the sector’, arguing that there ‘is a frequent misunderstanding about what profit means in the ECEC sector, and for-profit providers have become dangerously homogenised, not representing the financial realities of the smaller privately owned centres’.
5.45The Front Project considered profit ‘motives are not inherently good or bad’. They can ‘enable rapid expansion of services, but they can also create pressures that compromise quality and safety if not carefully managed’. While evidence from multiple reviews, inquiries and research indicates that ‘profit-driven incentives can sometimes run counter to the conditions children need to thrive’, at ‘the same time, there are many examples of high-quality for-profit providers, just as there are not-for-profits that fall short’. The Front Project considered that a ‘balanced, evidence-based approach would go further than broad labels of “for-profit” or “not-for-profit” to examine how incentives shape provider behaviour in practice’.
5.46Outside School Hours Council of Australia noted that incentives ‘are not just confined to for profit delivery structure, and incentives come in many varying shapes and forms, including in the not-for-profit sector’.
Proposed reforms
5.47Proposed reforms put forward by submitters included funding conditions or incentives to encourage services to focus on quality, including higher Child Care Subsidy rates or bonus payments to services that meet certain quality benchmarks (such as achieving Exceeding ratings) as an incentive for providers to invest in quality improvements, as suggested by the Australian Childhood Education.
5.48Goodstart Early Learning proposed that the Australian Government support a range of programs to improve access to capital to fund the expansion of the not-for-profit sector.
5.49The Centre for Policy Development expressed its support for price regulation, such as profit caps ‘to disincentivise those providers that are coming into the system for maybe the wrong reasons’. However, they also proposed ‘something like an independent pricing authority… to ensure that services are being funded to deliver a really high-quality service’.
Rental fees
5.50The committee also was informed that landlords may be deliberately charging ECEC centres high fees because of the expectation that government subsidies will continue. For example, Goodstart Early Learning submitted that developers ‘rather than providers are the driving force in growth of most new centres’, arguing that ‘considerable profits can be made in selling centres, and in leasing them’. They pointed to research which found ‘the influence of corporate landlords on the supply, type, quality and cost of ECEC services is substantial and increasing’, with rising rents in particular having an impact. Goodstart considered that too ‘much money is being made buying and selling ECEC providers and services banking on the “guarantee” of ongoing government subsidies’, which ‘in turn pushes up parent fees’. The Centre for International Corporate Tax Accountability and Research also argued that ‘corporate landlords’ influence on the supply, type, quality and cost of ECEC services is substantial and increasing’, and provided a comprehensive submission in support of this argument. In particular:
Corporate landlords’ reports to investors reveal an expectation that increased subsidies will strengthen landlords’ capacity to charge higher rents, as centre operators can use increased subsidies to increase fees without affecting families’ capacity to pay.
5.51The Centre considered that the Australian Government should increase transparency about how subsidies and family contributions are spent in ECEC. They proposed that the Australian Government (potentially with state and territory governments) ‘support and invest in alternative models of land ownership in ECEC’. This could include regulating rental caps, and a significant expansion of the Australian Government’s direct ownership of ECEC real estate.
5.52The Australian Education Union pointed to data from the 2024 Australian Early Development Census indicating the proportion of children who are developmentally vulnerable has increased in every domain, arguing that it ‘is clear from the data that the ECEC market model is not designed to adequately meet the needs of Australia’s children and our continued overreliance on private providers is a threat to quality provision’.
Licence fees
5.53Y Australia submitted that licence fees paid by OSHC providers to schools to secure a contract range up to $120,000 a year, arguing that ‘the licence fee is ultimately paid through the CCS which is intended to support the ECEC system, not fill gaps in school funding’. They called for action to address ‘the issue of unregulated licence fees’.
Flexibility and choice
5.54The committee learned that the current funding system is not providing sufficient choice and is excluding particular cohorts of children. In particular, evidence indicated that the current ECEC system may not be fit-for-purpose for some children—even excluding—unless their families can pay for services like nannies or au pairs, or, because of generational wealth, have grandparents who can afford to care for their grandchildren. These cohorts include:
Families struggling with ongoing childcare illnesses, including those who are immunocompromised and have complex health conditions;
Families whose children have attended centres subject to recent allegations of abuse;
Families living in ‘childcare deserts’ where the wait for universal child care will be too long without other subsidised alternatives;
Mothers who wish to return to work but would like to continue to breastfeed their baby;
Neurodiverse children (or suspected neurodiverse children, given the time required for a diagnosis);
Children who are not coping with childcare;
Single parents;
Children with Type 1 Diabetes;
Shift and fly-in-fly-out workers;
Seasonal workforces; and
Australians for whom placing children into the care of unfamiliar adults may not be culturally appropriate, including First Nations families.
5.55A variety of options are available in Australia as an alternative to centre-based care, but these are financially out of reach for many families. To put this another way, ‘choice’ in the current ECEC market ‘often exists only for those with the financial or social means to exercise it’. BubbaDesk argued that a ‘system that mandates full separation—or provides no funded alternatives—imposes costs on families who cannot conform’.
5.56Early Childhood Australia gave evidence that it ‘would like to see more consideration given to models like in-venue care, particularly in rural areas, where there is an undersupply of early childhood education and care’.
5.57The committee learned that current ECEC policy settings heavily favour large childcare centres, and alternative models, including family-based care, micro-centres and supported stay-at-home parenting are underfunded or not funded at all. The impact of lack of choice may be discouraging families from having children, with the Future Care Foundation pointing out that Australia has ‘the lowest birth rate in history. If we’re not finding ways to support families and having children and what that looks like, we’ll be in a dire situation in our economy in the next 20 years’. Conversely, improved choice may encourage greater workforce participation by parents and improve long-term outcomes for children.
5.58As such, as outlined below, many submitters and witnesses called for families to be provided with more genuine choice in the type of care they can access for their children. One witness argued ‘[y]ou wouldn’t have a public transport system with only trains or a healthcare system with only tertiary hospitals. So why do we have a childcare system that is one size fits all?’
Limitations of existing options
5.59The committee heard that there are issues in the existing models often referred to as providing genuine choice for families. For example, one submitter, who used in home care, reported that centre-based care ‘completely fails those with specific needs’, submitting that their child’s ‘life would be at risk’ in centre-based care’. As a result, in home care was their ‘only viable option… However, it feels as though my family is being punished for this medical necessity’. They reported that because of significant fee increases, the family may be unable to afford in home care, because of the gap between the subsidy and the cost of providing care.
5.60As one witness noted at the Brisbane hearing, the in home care program is under-subscribed because it ‘is incredibly complex to navigate’, including a reassessment process every three months for ongoing eligibility for the Child Care Subsidy. This in turn, she argued, created workforce instability given the uncertainty of whether work would continue after three months. She argued that the in home care system is ‘on the precipice of collapse, truly… which is just devastating to think about for families that are never going to be able to access a centre, for families that have children with complex needs and for families of shift-workers’.
5.61Family Day Care Australia argued that without ‘urgent policy recalibration to safeguard and grow this sector, thousands of families, particularly those for whom centre-based care is either unavailable or unsuitable, face the risk of being left without any viable childcare option’. In particular, they were of the view that demand for family day care ‘has not fallen. Viability has’, because of a ‘cumulative administrative load which is becoming unsustainable’.
5.62The Australian Home Childcare Association submitted that current Child Care Subsidy settings for in home care ‘do not recognise the real cost of delivering high-risk, labour intensive, and time-sensitive services to families with significant complexity’. They argued that a complexity-weighted model aligning with approaches for the NDIS, family services, allied health and clinical care has never been properly implemented for in home care.
5.63The Page Research Centre submitted that ‘the institutional childcare model is not delivering consistent and sufficiently high-quality care’. In particular, while public ‘investment in childcare is high… the quality children receive is uneven, inconsistent, and often insufficient’. It further stressed that, for children under the age of three ‘where attachment and relational continuity matter most’ care is often inconsistent in childcare centres.
5.64Proposed changes from the Future Care Project to the in home care program included removing restrictive eligibility, raising subsidy caps and delivering business training. They also proposed changes to family day care, including reviewing how educators can access 120-hour placements, providing mentoring and funding rural educator retention.
Infants
5.65The committee learned that many parents would prefer home-based or informal care, especially for very young children. Further, some parents do not want to be separated from infants in the first 1000 days, wish to continue to breastfeed on demand, want more flexibility, and consider institutional environments unsuitable for very young infants.
5.66Parents Work Collective noted that staffing ratios in Australia require one caregiver per four children (maximum) under two, ‘while the international recommendation is three children under two per caregiver, and many experts recommend just one or two babies per caregiver’. They argued that the evidence of benefits of ECEC to babies and young toddlers is not yet established, and ‘is, at best, mixed, with a significant number of studies showing adverse impacts’. Further, the high staffing ratios are expensive, pointing to Hungarian research suggesting that because of higher infection rates in group care, ‘the annual cost per child of parental leave was actually one third of the cost of running public daycare facilities’.
5.67Evidence pointed to the importance of secure, consistent caregiving in children’s early years to support better mental and physical health and educational attainment, and to the risks associated with high stress, fragmented care and early institutionalisation, of behavioural and emotional difficulties. The Centre for Independent Studies (CIS) argued that for ‘most infants, the evidence shows no inherent developmental advantage to early formal care over attentive parental care’, noting that there may be potential negative effects for very young children in ECEC. They also noted some research shows ‘a strong preference for parental or familial care in the first year’.
5.68Parents Work Collective proposed ‘proper consideration’ to ‘individualised, in-home care for very young children, especially pre-verbal babies and toddlers’. They proposed that this involve ‘increasing the Commonwealth’s paid parental leave scheme from 26 weeks to 52 weeks, together with expanding the CCS Scheme to cover care by grandparents, nannies and co-working creche options’, while continuing centre-based care as an option.
5.69The CIS further submitted that ‘Australian research indicates that formal childcare during the toddler years does not consistently produce cognitive gains for the broader population’, with the greatest developmental benefits being among children from disadvantaged backgrounds, who ‘are also disproportionately from families who do not meet the CCS activity test requirements – often due to low or irregular employment’.
5.70Mr Martin Stokie, Commissioner at the Productivity Commission, acknowledged that for ‘nought to three there are mixed studies, and probably the conclusion would be that early childhood education and care can be significantly beneficial relative to the alternative environment in which those children are growing up… [I]t’s more compelling with four- to-five-year-olds, less so at zero to three’.
5.71The CIS’s view was that ‘the evidence shows children’s developmental needs vary markedly by age, and… policy should reflect this diversity rather than [imposing] uniform structures across the 0–5 age spectrum’.
Subsidised options
5.72As outlined below, many submitters and witnesses called for more choice and more flexible care options and funding structures that will help services to effectively meet families’ needs. In support of increased flexibility, one witness pointed to other systems as examples of government funding supporting individualised choice of care. As Childcare Choice argued, in the current ECEC system:
Families with financial means can exercise choice. They can supplement care, adjust arrangements, or privately fund alternatives. Families without those means must rely on the subsidised model, regardless of whether it suits their circumstances. Expanding subsidy flexibility would not create inequality. It would reduce it. It would ensure that ordinary Australians— including those without extended family support or financial buffers—have the same ability to shape care arrangements as more affluent households. Choice should not be a luxury.
5.73Some submitters called for an expansion of the Child Care Subsidy to a broader range of care options. These could include care from grandparents, nannies and au pairs. Parents Work Collective considered that this would ‘reduce pressure on centre based services; free up places for children who benefit most from group care, including disadvantaged children and older children; and it would provide greater flexibility for families who are currently locked out of the system’.
5.74Further options proposed included expanding a payment like the Carer Payment so it includes parents or grandparents caring for children, and making payments direct to parents to support their choice of care for their child. Others proposed increased support for care outside standard hours, such as publicly funded centres close to hospitals for shift workers and an expansion of the Child Care Subsidy to close close-proximity childcare options that would allow parents to work with onsite childminding.
5.75The Centre for Independent Studies (CIS) proposed a three-tiered model which would include centre-based and family day care, licensed in-home or micro-group care, and occasional or non-resident relative care. They suggested that access be dependent on registration, identity verification and a prohibition on intra-household payments.
5.76The CIS argued that ‘government spending on child care is equivalent to over $11,000 per child per year’ for age 0–5, equating to around $9000 per child in Australian Government spending. They contended that the Australian Government ‘could instead simply give every family in Australia a $9,000 cash payment per year for every child between zero and five years old for the same cost to the budget’.
5.77Not all evidence supported these proposals. The Parenthood pointed to overseas experience in the United States and the United Kingdom ‘where government funding has been provided to assist parents to use alternative models of care to centre based day care’, stating that ‘what we’ve seen happen is the same thing that happens with the childcare subsidy: the cost of the service invariably goes up by the amount of the subsidy or the voucher’.
Safeguarding
5.78Some evidence underlined the importance of ensuring that every option for early childhood care is safe if the current funding system were to be expanded.
5.79Ms Hetty Johnston AM from Safeguarding People Australia noted ‘a push for “childcare-at-home” funding… I understand this idea, and the fear that drives it’. However, ‘this proposal would be open to financial rorting on an industrial scale… no registration, oversight, management, safeguarding – no checks and balances’.
5.80However, Ms Alanna Batho from Parents Work Collective told the committee ‘I don’t agree with the proposition that unregulated care is risky care… We have this form of care already… Many people use it, but, equally, because of economic necessity, many people are locked out of using it’.
5.81Proposals put forward in evidence to overcome any safety issues that could arise with expanded government funding for increased choice included community awareness raising, particularly on grooming and adult-to-adult grooming, given ‘the first step these bad actors take is to groom the adults around them’, as well as mandatory child safety training, registration, minimum qualification requirements, WWCCs, child safety standards and oversight from a regulator.
5.82Ms Allanah Batho from Parents Work Collective suggested the aged care model ‘of contracting with an individual person would be analogous to what we’re proposing here’, including with independent contractors. Similarly, Ms Angela Cochrane from the Future Care Foundation suggested looking to the regulation and oversight of other sectors involving care of vulnerable people. She argued:
Instead of making flexible home based care fit centre based care regulations, let’s look at the regulatory framework of other more adaptive models and then try and apply it in that space instead.
5.83Ms Batho suggested that care could be provided by registered carers, provided the carer meets certain minimum safeguards. She suggested carers could be registered on the National Early Childhood Worker Register, and minimum standards and monitoring could be introduced.
Expanded Paid Parental Leave
5.84Various submitters and witnesses called for Paid Parental Leave to be expanded, with some calling for 12 months as a minimum. The Front Project argued that real choice for families is ‘supported by parental leave policies that enable families to balance time at home with access to education and care’.
5.85Think Forward submitted that the existing ‘Paid Parental Leave scheme is still among the least generous in the OECD’. They argued that longer ‘parental leave improves child development outcomes, supports bonding, reduces maternal mental health risk, and helps fathers participate more fully in early caregiving’. Further, every ‘family deserves the security of knowing they can spend the first year of their child’s life together without sacrificing their financial wellbeing’.
5.86Ms Georgie Dent from The Parenthood informed the committee that ‘zero to 12 months is the hardest window to do well in early childhood education and care’. Further, ‘we know the evidence is really clear that, when babies have the opportunity to be cared for at home, when parents aren’t forced back to work before they’re ready, children do really well and so do parents’. She acknowledged that Child Care Subsidy for aged six months to 12 months ‘is cheaper than paid parental leave would be, but it’s not that much different’, pointing to ‘what we are getting for that investment’ in terms of reducing pressure on the early education workforce and allowing parents ‘to stay at home for longer when that’s what they want’.
5.87While this evidence highlights the importance of the first 12 months in a child’s development, it also underscores the role that policy settings play in enabling families to make decisions that reflect their circumstances. In this context, the committee received broader evidence that many families require flexible options that allow for care arrangements beyond a single model, particularly where extended periods at home are not feasible. This suggests that, within the existing framework, settings that support a range of care options may better enable parents to access more proximate or flexible forms of care during this period.
5.88The NSW Advocate for Children and Young People noted that under the current system, ‘parents have no choice but to return to work’. She argued that it ‘is time to give serious consideration to how governments can enable parents to spend longer at home with their children if they choose to, or if no affordable or quality service is available’. She considered that this would ‘enable true choice around services’ and ‘significantly reduce the current burden on the system, which is unsustainable’.