Australian investment in ECEC examined in latest Mitchell Institute paper
The Sector > Policy > Australian investment in ECEC examined in latest Mitchell Institute paper

Australian investment in ECEC examined in latest Mitchell Institute paper

by Jason Roberts

February 17, 2020

The Mitchell Institute has released a paper examining investment in the early childhood education and care (ECEC) in Australia as an advance chapter of an upcoming series on financial investment in the education sector.


The report explores the amounts of government funding of ECEC, how much parents and carers are paying, per child investment on an absolute basis, but also relative to primary schools, and how much Australian governments are investing in education provision, as supposed to care provision, in ECEC settings.


In line with the Mitchell Institute’s mission to strengthen the relationship between evidence and policy, the primary purpose of the paper is to highlight promising areas of ECEC funding policy reform which will in turn deliver better outcomes for Australians and Australia as a whole. 


How much does Australia invest in ECEC?


The report highlights that Australian Governments, both Commonwealth and State, invested $9.2 billion in ECEC expenditure in 2018, a slight fall from 2017 but still substantially higher (140 per cent), than that allocated in 2008, with the majority of the investment being provided through Government subsidies. 


In a bid to try and contextualise the increase in Government funding, the report highlights that over the same period ECEC participation rates have also increased materially, between approximately 68 per cent and 86 per cent, but still fall short of the 140 per cent increase in overall funding suggesting that other factors may have played a part in the funding increases. 


The report goes on to suggest that part of the difference may have been associated with increased investment in quality improvements associated with the introduction of the National Quality Framework but that the overall impact of policy reforms on ECEC costs at this point remains uncertain, even though there is tangible evidence of outcome improvements in this key area. 


How much do Australian families invest in ECEC?


In a section devoted to estimating the total expenditure of Australian families on ECEC services the paper highlights a key limitation to calculations as the lack of available data, although estimations are possible through approximations from Child Care Rebate (which stopped on 1 July 2018)  payments and also data included in the Household Income and Labour Dynamics in Australia (HILDA) series. 


The paper concludes that overall around $6.8 billion was spent by families and carers on ECEC services in 2016/17 and when combined with Government expenditure suggests an overall ECEC sector financial size of between $13 billion and $16 billion per year. 


How much does Australia invest per child in ECEC? LDC v Primary 


Although the per capita investment in ECEC can be calculated given existing data, the report seeks to examine investment per child in absolute terms as well as relative to its nearest educational comparative, primary education, before exploring how the cost is met by the mix of government and parent contributions. 


With respect to investment per child, the paper uses long day care (LDC) hourly rates as sourced from Department of Education’s quarterly child care report and compares them to an implied hourly cost of primary school attendance. 


The 2017 figures for child per hour in LDC was $9.43 and the estimated expenditure per student hour in a government primary school was $9.59, highlighting that the cost of ECEC at this juncture is below primary on an hourly basis. 


With respect to who is funding the costs the report noted on average that governments contribute a much higher proportion of total investment in primary schools compared to the ECEC sector, meaning that households have a greater role in covering ECEC costs, and that most families would be financially better off once their children step up into primary education. 


This point is highlighted in an analysis of average household contributions to ECEC versus primary school  which found that families with household incomes above $170,000 would be paying more for ECEC services than they would for an independent primary school. 


How much do Governments invest in education (as supposed to care) provision?


The paper then goes on to examine specifically how much governments have been investing in the educational component of ECEC by focusing on preschool expenditure and in particular the National Partnership Agreement on Early Childhood Education. 


Notably, the paper illustrates that investment in preschool expenditure has increased at a faster rate than investment in other ECEC services which is in contrast to participation rates which have experienced a fall in preschool settings but rise in others. 


Although it is unclear precisely what this trend implies it does suggest that on a proportional basis governments have been more willing to increase investment in preschool settings compared to other ECEC settings and perhaps that a reclassification of child care to an education and training service may result in a better understanding of the benefits of greater public investment in child care. 


Key implications for future ECEC policy drawn from ECEC funding analysis**


In light of the overall analysis the authors of the report conclude with three areas they consider promising for ECEC funding reform, namely;


  • Greater transparency and certainty in government investment with a specific focus on system complexity and funding consistency


  • Funding to lift quality and maximise return on investment with a specific focus on the disparity between preschool funding and primary funding and that reclassification of all ECEC services as education and training could address this


  • Mechanisms to address high financial cost burdens on families with a specific focus on exploring other models of ECEC provision adopted by countries such as the UK, Sweden and Germany. 


To read the Mitchell Institutes report please click here.  


** Readers may note that the Mitchell Institute report on page 17 refers to four promising areas of policy reform but only details three in the report. In addition, readers may note that the title of the third reform differs in substance to the narrative beneath it. Our reporting attempts to account for these discrepancies.

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