The Australian Competition and Consumer Commission (ACCC) has released its second interim report on childcare, finding that market forces and existing government policy settings are not effectively delivering accessibility and affordability in childcare services across Australia.
Market Dynamics and Supply Disparities
The report reveals that market dynamics tend to favor socio-economically advantaged areas and major cities, where parents have greater ability to pay for childcare. Providers’ decisions to offer childcare services are influenced by factors like expected viability, workforce participation, demographics, and geographic location. Lower income and very remote communities tend to have fewer childcare services, creating disparities in access.
Activity Test’s Impact on Demand
The ACCC also noted that the current activity test and eligibility for subsidized hours of care significantly impact the demand for childcare, particularly for low-income households. Low-income households face higher out-of-pocket expenses when seeking additional childcare hours, which are relatively more expensive for them.
Costs and Profitability
While childcare costs have been rising, the sector remains generally profitable. Labor costs account for the majority of expenses, with an average of 69% for center-based day care costs. Large not-for-profit providers tend to allocate savings into workforce improvements, which enhance service quality.
Recommendations and Policy Considerations
The ACCC recommends that the government reevaluate childcare policy settings and broader measures to better address government priorities and unintended consequences. The report highlights the importance of direct subsidies for Aboriginal Community Controlled Organizations providing childcare services for First Nations children. Additionally, the ACCC suggests government support for underserved communities and a market stewardship role in areas with childcare service shortages.
Workforce Attrition and Quality
Staff shortages and educators leaving the sector have an impact on the supply, profitability, and quality of childcare services. The ACCC suggests considering regulatory frameworks that can attract and retain early childhood educators, given the importance of the educator-child relationship to families when choosing a service.
International Comparisons
The report highlights that childcare in Australia is less affordable compared to most other OECD countries. An Australian couple with two children on average wages spent 16% of their net household income on net childcare costs in 2022, compared to the OECD average of 9%. The ACCC observes that many countries are increasing spending on childcare to improve affordability and moving towards greater regulation of childcare fees.
Next Steps
The ACCC is seeking feedback on the draft findings and recommendations by October 29, 2023. Families from culturally and linguistically diverse communities are also invited to share their views on childcare services through an online survey. The findings emphasize the need for a nuanced approach to childcare policy to ensure affordability and accessibility for all Australian families.
