Coalition Senators' dissenting report

1.1The Early Childhood Education and Care (Three Day Guarantee) Bill 2025 (Bill) was introduced to the parliament on 5 February 2025. It was referred by the Senate to the Senate Education and Employment Legislation Committee (committee) for inquiry with a report due on 21 March 2025.

1.2The committee agreed the inquiry would be conducted on the papers, with submissions due on 28 February 2025.

1.3The parliament was not scheduled to resume debate on the Bill until after the committee finalised its report. On 13 February 2025, the government rammed it through the parliament. The Bill became an Act on 20 February 2025.

1.4The Act removes the activity test for all children for 72 hours of subsidised care a fortnight, and 100 hours of subsidised care a fortnight for Indigenous children.

1.5The Government has costed this at $426.7 million over five years from 2024-25.

1.6The Coalition opposed the removal of the activity test and makes the following observations.

Activity test

1.7The Coalition brought in the biggest reforms to the early childhood education and care (ECEC) sector in 2018, introducing the Child Care Subsidy (CCS) and activity test.

1.8The activity test struck a balance between targeted child care support for working families who rely on it, a generous safety net to protect the most vulnerable, and ongoing support for high quality learning.

1.9The current activity test levels are as follows:

Services Australia, Activity level and subsidised care.

1.10We know that the overwhelming majority of CCS families will not see any changes or benefit, as they are already entitled to 72 or 100 hours of care per fortnight.

1.11ECEC is an essential service that families rely on to study, to work and to pay the bills, but Labor's changes will make life harder for these families.

1.12Despite this fact, the Department has not conducted or requested any modelling on the impact of the removal of the activity test on workforce participation, women's workforce participation or productivity.

1.13In the current cost of living crisis, families need these services in order to make ends meet.

1.14The government has argued the activity test has been a barrier for disadvantaged and lower-income working families, especially mothers, and the Act will change this.

1.15Associate Professor Ben Phillips from ANU College of Arts and Social Sciences has raised doubts about this claim:

The activity test's introduction ... in 2018 did not appear to change childcare use patterns or numbers in any obvious way so it could be concluded that relaxing that test may also not have a substantial impact on childcare use in Australia ...[1]

1.16Instead of making life easier for those who are working more than ever before by improving access, choice and flexibility, the government has chosen to make it harder for them.

Surge in demand

1.17The Government estimates around 66,700 families will benefit in the first full financial year and more than 100,000 families will be eligible for additional hours of subsidised care.

1.18The ECEC sector in Australia, broadly speaking, is at capacity. A combination of workforce shortage and lack of services particularly in regional, rural and remote communities, has led to long waiting lists and child care deserts.

1.19The government's abject failure to meaningfully deal with these issues over the last three years means more demand for limited places.

1.20The government's use of the word ‘guarantee' is highly misleading because it cannot guarantee all families who want to use 72 hours of care per fortnight will actually be given those places.

1.21This is a concern noted by KU children's services who said:

Using the language of 'guarantee' could also mislead some families to assume 3 days of secured access instead of increased hours of subsidy.[2]

1.22Services will be forced to navigate difficult situations where families demand three days of care but that demand cannot be met.

1.23The government has failed to outline how it will assist services in these situations.

1.24This is a concern raised by the Australian Local Government Association (ALGA):

… recognising that should three days of childcare be guaranteed, it will lead to increased pressure on the already limited workforce and infrastructure for Local Governments that provide childcare services. Attention needs to be given to growing the childcare workforce, especially in regional and remote areas, to properly meet what will be the increased need for educators.[3]

1.25KU Children's Services also raised this concern:

There are current shortfalls of qualified ECEC professionals to meet existing demand and support sustainable working conditions.[4]

1.26The Australian Parents Council (APC) also raised similar concerns:

The ECEC sector is already facing a workforce crisis, with staff shortages, high turnover rates, and increasing burnout among educators.

If demand for ECEC increases due to the three-day guarantee, existing services may struggle to meet demand, leading to longer waitlists and accessibility issues –especially in regional and remote areas.[5]

1.27The APC also holds concerns about the impact this demand will have on quality education, which is a key pillar of our ECEC system:

Without proper oversight and educator support, an increase in demand may lead to overcrowded classrooms, lower staff-to-child ratios, and reduced quality of care.[6]

1.28The Coalition is also concerned the full impact of this policy has not been accounted for as the Department of Education (the Department) has been unclear about modelling on new families who will enter the CCS system.

Regional, rural and remote access

1.29Over the last three years, the government has not introduced any policies to address the severe lack of access to appropriate ECEC in regional, rural and remote communities.

1.30The Isolated Children's Parents' Association of Australia highlighted this:

In remote locations across Australia, early childhood education services are very limited, with often the only available option to access subsidised care being the In Home Care (IHC) program.[7]

1.31This is a concern outlined by Anglicare Australia:

... many families struggle to find available ECEC services in their communities. Nearly 1.1 million Australians live in rural or regional communities where there is no accessibility to childcare at all.[8]

1.32It is worth noting, analysis by the Mitchell Institute suggests around 6 million Australians live in a childcare desert.

1.33Anglicare Australia also notes disadvantaged communities also struggle to access suitable ECEC:

... childcare is less accessible in lower socio-economic neighbourhoods, as providers are incentivised to operate in more advantaged areas where they can levy higher fees despite increased competition.[9]

1.34The Coalition notes the government's recent announcement of a $1 billion Building Early Education Fund (BEEF).

1.35Recent Senate Estimates, however, has not given any reason for confidence this policy will achieve increased access for regional, rural and remote communities.

1.36The Department was unable to answer any questions regarding timing, applications and guidelines, and the Coalition believes there is good reason for concern the government will use a one size fits all approach, which is not appropriate for these communities.

1.37This sentiment is echoed by Early Childhood Australia:

Models which work well in Australia's capital cities and surrounds, cannot simply be replicated into regional, rural and remote areas.[10]

Priority of access

1.38The activity test plays an important role in maximising workforce participation and supporting working families as they resume their careers after starting a family.

1.39The child care subsidy currently costs around $15 billion a year. The activity test ensured taxpayer money was targeted to those who need support the most.

1.40The Act will make it more difficult for these families to find suitable care arrangements for their children as they compete with non-working families for limited spaces.

1.41In removing the activity test, all priority of access measures have also been removed, meaning those who require the support of early childhood education and care (ECEC) the most – working families and vulnerable families – will not be given priority over others.

1.42The Early Learning and Care Council of Australia (ELACCA) has recommended the Department implement priority of access guidelines in recognition of the fact this Act removes any form of priority of access:

The objective of such guidelines is to ensure access to early learning and care is prioritised to children who may be facing vulnerability and disadvantage and to prevent unintended outcomes, including ensuring that existing children from working families are not displaced.[11]

1.43The Coalition acknowledges stakeholders may hold the view that removing the activity test will improve access to ECEC for disadvantaged children.

1.44The Coalition however notes that generous exemptions are already in place ensuring disadvantaged families and communities have guaranteed access to subsidised care, as outlined by the Department:

Department of Education, Submission 5, p. 9.

Department of Education, Submissions 5, p. 10.

Indigenous Australians

1.45As noted, the Act gives all Indigenous children 100 hours of subsidised care per fortnight.

1.46The National Indigenous Australians Agency (NIAA) has submitted that this change will support improvements in developmental outcomes for First Nations Children, specifically noting Closing the Gap Targets 3 and 4.

National Indigenous Australians Agency, Submission 9, p. 4.

1.47The latest Closing the Gap report notes Target 3 is well and truly on track, with 101.8% of Indigenous children enrolled in 'Year Before Full Time Schooling' early childhood education in 2023.

1.48Target 4, however, has gone backwards since the 2018 baseline of 35.2%, with just 34.3% of Indigenous children developmentally on track when they start school.

1.49While this discrepancy can be linked to several reasons, serious consideration must be given to the government's approach of using a 'one size fits all' approach to ECEC. There is no doubt that traditional long day care does not necessarily work for all children, including Indigenous Australians.

1.50It is also worth noting that vulnerable and seriously disadvantaged children from non-Indigenous backgrounds, are entitled to 72 hours per fortnight, not 100.

Disparity in cost

1.51The Coalition is concerned by the extraordinary disparity in cost between the Productivity Commission's modelling and the Department's.

1.52The Productivity Commission modelled that three days of subsidised care a week for all children would increase CCS expenditure by $1.7 billion per year.

1.53The Government has costed the total sum of the policy over five years to be just $426.7 million.

1.54In reference to this, the Department[12] notes they used different methodologies but that does not satisfy why the discrepancy is this substantial.

1.55It is also worth noting that while the Government has costed the policy over five years from 2024-25, this was for aesthetic purposes, as the policy will not roll out until 1 January 2026.

Footnotes

[1]Associate Professor Ben Phillips, Submission 15, [p. 6].

[2]KU Children's Services, Submission 8, p. 3.

[3]Australian Local Government Association, Submission 3, p. 1.

[4]KU Children's Services, Submission 8, p. 5.

[5]Australian Parents Council, Submission 1, p. 2.

[6]Australian Parents Council, Submission 1, p. 2–3.

[7]Isolated Children's Parents' Association of Australia, Submission 14, [p. 2].

[8]Anglicare Australia, Submission 10, [p. 2].

[9]Anglicare Australia, Submission 10, [p. 2].

[10]Early Childhood Australia, Submission 12, [p. 6].

[11]Early Learning and Care Council of Australia, Submission 13, p. 4.

[12]Department of Education, Submission 5, p. 12.