The rising cost of early education and care has been a constant headline issue.
The ACCC Childcare Inquiry Interim report released in July found that despite efforts across governments to rein in out-of-pocket costs for families, affordability has decreased.
It found that even with increased subsidies, families of children in centre-based care have seen their out-of-pocket costs increase by 7% over the last four years.
The ACCC Child Care Inquiry was established by Treasurer Jim Chalmers to identify exactly what is driving these costs and to make recommendations to the government on ways to ease pressures on families.
Fixing this and delivering a sustainable, affordable, and high-quality ECEC system starts with understanding exactly what the costs are and how government funding is being used across the sector.
AT A GLANCE
ACCC Childcare Inquiry: Launched to investigate rising costs of early childhood education in Australia.
Interim report findings: Despite increased government subsidies, out-of-pocket expenses for families rose by 7% over four years.
Fee trends: Fees are rising faster than inflation, with disadvantaged families most affected.
Provider disparity: Larger providers charge higher fees; not-for-profit and small providers offer more affordable rates.
Family priorities: Quality, safety, and location are top considerations for families choosing services. ECEC services tend to compete in a limited geographic market for families in the local area.
Impact: ACCC's findings will influence future early education reforms in Australia.
What is the inquiry investigating?
The inquiry is looking at the factors that are driving the cost and supply of federally funded early education services in Australia including centre-based care, outside school hours care and family day care. State-funded preschools/kindergartens are not within the scope of the inquiry.
The inquiry is focusing on 3 key areas:
- Cost drivers, including employee wages and property costs.
- How early education markets operate, including supply in regional and metropolitan areas, levels of competition and levels of demand and supply.
- Fees charged and the impact on consumers, including growth in fees and the impact of government policy.
The final report is not due until December, but the interim report released in July included findings that supported the experience of families and operators across the ECEC sector:
- Fees are rising faster than inflation.
- Families with the least are paying the most.
- Community and small provider services offer more affordable options for families.
The interim report draws on information collected from service providers and peak bodies, as well as a voluntary survey of more than 4,000 families using early childhood services.
It found that over the last four years, ECEC fees have increased at a higher rate than inflation, between 20-32% across all services. Out of pocket fees for families have increased by 7% for centre-based care and 12% for outside school hours care over the same period, despite the introduction of higher Child Care Subsidy rates.
These rising costs are having the greatest impact on disadvantaged families. The report found that about half of families with the lowest incomes spend between 5-21% of their disposable income on ECEC, compared to higher income families, which spend 2-9 % of their disposable income on accessing services. It also found that families in higher income areas have access to greater numbers of services than families in low-income areas, however, they are often charged higher prices.
While fees have increased across the board, it was also found that large providers were more likely to charge higher fees than small and medium providers. Despite economies of scale, large provider fees for centre-based care were found to be up to 11% higher on average than small providers. Additionally, it was found that not-for-profit services charged lower fees than for profit services by an average of 7%.
While fees and affordability impact a family’s choice to access early education services, quality, location and safety are the top factors in choosing between services.
The report showed that families prioritise locations close to home and will make a choice of service based on perceptions of quality and safety, over considerations of differences in price. As a result, ECEC services tend to compete in a limited geographic market for families in the local area.
What CELA says
The ACCC’s interim childcare report has confirmed what we already know: the majority of affordable early education and care spaces in the areas of greatest family need are run by small providers.” CELA CEO Michele Carnegie CELA said.
“Small providers maximise the value of government funding by prioritising investment in ECEC services, resulting in lower fees for families.
“The ACCC report shows that the current system is not making education and care more affordable to parents or ensuring equitable access.
“On behalf of CELA’s members, I’ll continue to actively engage with this inquiry, focusing on the solutions required to provide quality early education for all children while reducing costs to parents.”
Why this inquiry is important for the sector
The ACCC inquiry was ordered by the Treasurer to provide recommendations to ensure access to affordable early childhood education that meets the needs of children and families. The findings and recommendations of the inquiry will also feed into the Productivity Commission Early Education and Care Inquiry, which is looking more broadly at reforms, including the possible implementation of a universal 90% subsidy for all families.
Both inquiries are likely to help determine the way that ECEC services and families are funded over the next decade. Possible funding changes will aim to deliver a more accessible and affordable ECEC sector as well as ensure greater equity for disadvantaged families and those living in rural and regional areas.
The ACCC inquiry will continue to work directly with the sector to build a cost database and undertake detailed cost analysis. It will also monitor the early effect of the Government’s changes to the Child Care Subsidy which came into effect in July this year.
A consultation paper including discussion on the cost of providing early education services as well as potential draft findings and recommendations will be released in September.
Following this consultation, the final report is due to the Treasurer at the end of the year.
DOWNLOAD THE INTERIM REPORT