Federal Treasurer releases much anticipated terms of reference for Productivity Commission ECEC sector enquiry

Australian Federal Treasurer Jim Chalmers has formally instructed the Productivity Commission to conduct an inquiry into the early childhood education and care (ECEC) sector in Australia and has released a detailed Terms of Reference outlining its scope, process and timelines. 

The inquiry will deliver on a central pre-election pledge first touched upon by now Prime Minister Anthony Albanese in his budget reply speech in October 2021 to launch a comprehensive review of the ECEC sector with a view to potentially, if conditions merit, implementing a 90 per cent universal subsidy for all families. 

“The Government believes a more accessible ECEC is one of the most powerful initiatives it can pursue for increasing workforce participation, particularly for women,” the terms of reference note, adding that the Government is committed to identifying solutions that will chart the course for universal, affordable ECEC – in the great tradition of universal Medicare and universal superannuation. 

The announcement by Mr Chalmersheralds the most comprehensive review of the ECEC sector since the Productivity Commission last examined the sector in detail which culminated in its 814 page Childcare and Early Childhood Learning Report released in October 2014 which paved the way for the Child Care Subsidy change legislation introduced in July 2018. 

Scope of the latest ECEC sector enquiry 

The Productivity Commission has been asked to make recommendations that will support affordable, accessible, equitable and high-quality ECEC that reduces the barriers to workforce participation and supports children’s learning and development. 

The Commission has also been also instructed to consider a universal 90 per cent child care subsidy rate.

The key aspects of ECEC where improvement is anticipated, and on which recommendations are to be provided, are options that improve or support: 

• affordability of, and access to, quality ECEC services that meet the needs of families and children
• developmental and educational outcomes for Australian children, including preparation for school
• economic growth, including through enabling workforce participation, particularly for women, and contributing to productivity
• outcomes for children and families experiencing vulnerability and/or disadvantage, First Nations children and families, and children and families experiencing disability
• the efficiency and effectiveness of government investment in the sector.

The key areas of ECEC and beyond that the Commission is to consider as part of the enquiry process to create a body of evidence, knowledge and information to draw informed conclusions regarding appropriate recommendations are:

• impacts on demand, supply, and fee growth
• interactions with existing and planned Commonwealth, state and territory ECEC policy settings and funding, including recent commitments by the New South Wales and Victorian governments to expand access to 30 hours of preschool for children in the year before full time school and support more 3-year-old children to participate in preschool, and any commitments in response to the South Australian Royal Commission into Early Childhood Education and Care
• interactions with other incentives and disincentives to join or increase participation in the workforce
• ECEC sector workforce requirements and the capacity to meet these requirements within current Commonwealth, state and territory initiatives
• required regulatory settings, including to manage compliance and integrity risks for Commonwealth programs
• impact on access to quality ECEC, including by remoteness and access to flexible services
• whether different settings are required based on the location of services or family circumstances
• the operation and adequacy of the market, including types of care and the roles of for-profit and not-for-profit providers, and the appropriate role for government
• activity requirements and other ECEC policy settings, including to reduce system complexity and debt for families
• impacts on the economy, including workforce participation, productivity and budgetary implications
• a pathway for implementation

Mr Chalmers acknowledged that the Commission should have regard to any findings from the Australian Competition and Consumer Commission’s (ACCC) Price Inquiry into child care prices, as well as any other relevant government reviews of ECEC programs.

Process 

The enquiry will include a broad public consultation process, including by holding hearings, inviting public submissions and releasing a draft report to the public.

In addition, the Commission will consult with state and territory governments, the ECEC sector where required and on matters relating to First Nations children, families, and services consult with the Closing the Gap Early Childhood Care and Development Policy Partnership.

The Commission will commence the enquiry on 1 March 2023 and provide a final report to the Government by 30 June 2024.