Paving the path: Addressing market imbalances to achieve quality and affordable childcare in more places
22.10.2024 - 08:29
Our latest report, in partnership with The Front Project, examines how Australia's childcare sector has evolved and the growing imbalances in service provision. Long Day Care (LDC) centres, which form the backbone of Australia's childcare system, have seen supply increase by 69% since 2013. However, this growth has been dominated by for-profit providers and is unevenly distributed. In low SES areas, there are 41% fewer LDC places than in high SES areas. Not-for-profit providers, who deliver higher quality care and charge lower fees on average, have seen their market share decline particularly in metropolitan and gentrifying areas. The report highlights the need for policy intervention to ensure quality and affordable childcare is available to all families.
Rising demand has driven an increase in the supply of long day care centres
The demand for childcare services has grown substantially, driven by three key factors: increasing female workforce participation, child population growth, and expanded government funding. Female workforce participation for ages 25-44 has risen by 27 percentage points since 1981, while the under-7 population has grown by over 500,000. Government funding has increased by 14% annually since 1981, making childcare more accessible to families.
In response to this growing demand, Long Day Care (LDC) services, which account for 52% of all early childhood education and care services, has expanded significantly. Supply of LDC places has increased by 69% since 2013, from 401,000 to 675,000 places. This growth has been achieved through both the establishment of over 2,700 new centres and the expansion of existing facilities, with average centre capacity increasing from 63 to 74 children.
LDC supply growth has been uneven across regions and provider types
Low socio-economic, and remote areas have relatively poor access to LDC services
Despite strong overall supply growth, there are noticeable disparities in childcare accessibility. Low socioeconomic areas face significant challenges, with 41% fewer LDC places per 100 children compared to high socioeconomic areas. The geographic divide is equally concerning - while metropolitan areas enjoy good access to services, 109 Local Government Areas, primarily in rural communities, still have no LDC services at all.
Increasingly, for-profit providers are dominating the market, but they are concentrated in metro and gentrifying areas
The childcare market has seen a significant shift in provider composition, with for-profit providers increasing their market share from 60% to 70% since 2013, while not-for-profit providers have declined from 32% to 23%. However, this dominance is not uniform across regions. For-profit providers have established a particularly strong presence in major cities, where they now operate 75% of services, up from 63% in 2013. In contrast, they make up only 15% of services in remote and very remote areas, where not-for-profit providers remain the backbone of childcare, operating over two-thirds of services.
The impact of market forces is particularly evident in gentrifying areas, where changing demographics and rising costs are reshaping the provider landscape. Between 2021 and 2024, these areas saw a 25% increase in for-profit places while not-for-profit places declined by 10%. This trend likely reflects the rising operational costs in gentrifying areas, particularly rent increases, which favour providers with stronger profit margins.
Not-for-profit providers excel in quality, wages and affordability
Not-for-profit providers on average demonstrate better performance across quality, staff wages and affordability. In terms of service quality, 28% of not-for-profit LDCs are rated above the National Quality Standard, compared to just 15% of for-profits.
Employment practices also differ significantly, with 95% of staff in large not-for-profits receiving above-award wages, compared to 64% in large for-profits. Not-for-profits also have higher educator-to-child ratios and staff retention rates.
Affordability remains a key advantage of not-for-profit providers. Among large providers, only 15% of not-for-profits charge above the hourly rate cap, compared to 43% of for-profits.
As supply grows policy needs to ensure a balanced market to provide quality and affordable care
As Australia moves toward improving childcare access and inclusion, policy needs to address the growing market imbalances particularly in metropolitan and gentrifying areas. Policies should support quality and affordable care across all markets. Supporting not-for-profits in larger markets enables them to cross-subsidise services in thinner markets. This ensures not-for-profits are sustainable across different market types, improving care quality and affordability for all Australian families.
Read and download the full report.
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