Key observations from Productivity Commission report
The Sector > Quality > In The Field > Unpacking the Productivity Commission ECEC Draft Report – Observations and insights

Unpacking the Productivity Commission ECEC Draft Report – Observations and insights

by Jason Roberts

November 28, 2023

The Productivity Commission has released its draft report on the Australian early childhood education and care (ECEC) sector in which it outlines a set of initial recommendations that support a policy reform agenda targeted at underwriting the journey to “universal access.”


Specifically, the Terms of Reference required the Commission to make recommendations to support affordable, accessible, equitable and high-quality ECEC that reduces barriers to workforce participation and supports children’s learning and development, including considering a universal 90 per cent child care subsidy rate.


The draft report comprises a close analysis of the state of the ECEC sector and presents thirty two recommendations covering a wide range of areas across the sector eco-system which will be considered through a phase of consultations planned for the next several months (outlined at the conclusion of this piece.) 


This article aims to surface a selection of observations lifted from the report with associated commentary designed to contextualise the information presented for a broader ECEC audience. 


Observation 1 – The draft report is incredibly detailed, thorough and lengthy


The Productivity Commission (PC) has invested substantial resources in terms of time and expertise in creating this document. The report titled “A path to universal early childhood education and care” is 101 pages long. When the supplemental information is included the report is a massive 440 pages long. 


Comment – Consistent with its mandate the PC has completed an unprecedented deep dive, from all angles, into the workings of the ECEC sector and in so doing has created a strong evidence based foundation from which to draw robust conclusions that will ultimately inform policy.


Observation 2 – ACCC reference to supply side subsidy/direct price controls unheeded


In its Interim Report into the market for the supply of ECEC services the ACCC included a recommendation to further consider supply-side subsidies and direct price controls as a mechanism to mitigate shortfalls in rate caps whilst also referencing the PC inquiry.


Comment – The ACCC reference to supply side subsidy and direct price controls appear to have gone unheeded in the PC report with policy recommendations grouped around tweaking the current Child Care Subsidy framework as opposed to replacing it. 


Observation 3 – Wage negotiation references raise ante on Government to fund increase


The connection between high wages and increasing costs is now well understood but the PC went one step further by referencing recent funded wage increases for aged care workers and noting that “there will be considerable pressure on governments to fund any increase to limit the impact on fees and out-of-pocket expenses.”


Comment – The Australian Government has already been invited to attend wage negotiation discussions between ECEC employer and employee representatives. The PC referenced their role in the process and the role of funding to keep the issue front of mind as negotiations proceed. 


Observation 4 – Demand to jump by 21 per cent if CCS change recommendations pass


The suggested key modifications to the CCS come in two streams; the first is offer all families three days of subsidsed care per week with no activity test and; the second is extend a 100 per cent subsidy rate for families earning less than $80,000 per annum. 


Comment – These changes would lead to a 21 per cent increase in demand for ECEC, the PC estimates, but would also increase costs by 53 per cent too. Interestingly, they also show supply side measures such as mandating a $10 a day fee for all families is estimated to have similar cost and benefit profiles but would disproportionately benefit more affluent families relative to less affluent ones.  


Observation 5 – Outside preschool hours ECEC floated for sessional kinders 


The PC recommends that dedicated preschools be allowed to claim the CCS for additional ‘non-preschool’ hours by creating a separate ‘wrap-around preschool’ care type that would cater to preschool aged children. 


Comment This is an important recommendation that could have consequences for long day care demand, given one of its differentiators as a care type is extended hours, which when combined with an inhouse preschool program, is a proxy for the wrap around preschool service anyway. 


This article focuses on just five of the thirty two recommendations. Interested readers should consider reviewing the report which can be found here and the full list of recommendations below:


1. Support universal access in persistently thin markets via supply-side funding

2. Reduce barriers to educator upskilling

3. Support innovative delivery of teaching qualifications

4. Improve registration arrangements for early childhood teachers

5. Lift support and mentoring for new early childhood teachers

6. Improve pathways and support for Aboriginal and Torres Strait Islander people to obtain ECEC qualifications

7. Contribute to professional development for the ECEC workforce

8. Improve the ECEC Workforce Strategy

9. Modify the Child Care Subsidy to improve affordability and access

10. Monitor rises in fees and out-of-pocket expenses

11. Make information about CCS eligibility easy to find and understand

12. Improve the CCS calculator on the Starting Blocks website

13. Prompt families to update their details with Services Australia

14. Provide better information to families about CCS withholding rates

15. Amend the Disability Standards for Education

16. Amend eligibility requirements for inclusion funding

17. Review and amend additional educator subsidies

18. Reduce administrative burden of Inclusion Support Program applications

19. Improve coordination of inclusion funding between governments

20. Ensure integrated services are available where needed

21. Support connections between ECEC and child and family services

22. Introduce a higher hourly rate cap for non-standard hours

23. Examine planning restrictions related to operating hours

24. Ensure occasional care is available where needed

25. Support out of preschool hours ECEC

26. State and territory regulatory authorities should improve their performance reporting

27. Ensure regulatory authorities are adequately resourced

28. Incentivise quality provision in new ECEC services

29. A new review of the National Quality Framework

30. Ensure appropriate quality regulation for services outside the scope of the National Quality Framework

31. Improve policy coordination and implementation

32. Establish an ECEC Commission


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