ECEC sector responds to final ACCC Childcare inquiry report
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ECEC sector responds to final ACCC Childcare inquiry report

by Freya Lucas

January 30, 2024

The Australian Competition and Consumer Commission (ACCC) released the final report from its inquiry into the early childhood education and care (ECEC) sector yesterday.


A number of advocacy and interest groups from the ECEC sector, including the Australian Childcare Alliance (ACA), The Front Project, the Minderoo Foundation’s Thrive by Five campaign and Goodstart Early Learning have shared responses to the report, which have been summarised below. 


The Sector has also released a piece which discusses the key takeaways from the report, which may be accessed here


Major challenges captured 


The majority of the respondents to the report agreed that the ACCC had captured the major challenges facing not only the ECEC sector, but parents and families also. 


Key challenges identified include (but are not limited to): 


  • The Activity Test is impacting children from the most vulnerable families, and it may be acting as a barrier to disadvantaged children accessing care and stopping parents starting or returning to work or study.


“This is the tenth report in four years to recommend changes to the activity test to help secure access to early learning for all children, regardless of the circumstances of their parents,” Goodstart advocacy manager John Cherry said. 


“This is particularly important for children living in vulnerable circumstances as the report finds families with lower activity test entitlements use a greater share of unsubsidised hours, leading to higher out-of-pocket expenses and potential affordability concerns.”


  • Early learning services and government support and regulation (across different levels of government) are highly interconnected, meaning changing one aspect of the system can have wide-ranging impacts across the sector. Any changes to policy must be assessed across the whole sector.


  • Families in regional and rural Australia are especially challenged when it comes to being able to access ECEC, however families across the country are also facing availability pressures. 


  • The Child Care Subsidy is complex for parents and guardians to understand and estimate out-of-pocket expenses.


  • Staffing constraints are stopping more providers expanding their operations or operating at full capacity.


“We must provide practical support to teachers and educators recognising the significant contribution they make to children’s learning and development. As the Front Project’s pre-budget submission recommends, a 25 per cent Commonwealth-funded wage increase is vital and will have wide-ranging impacts,” The Front Project CEO Jane Hunt said. 


“We know that to retain and attract high-quality professionals and improve outcomes for children, we must raise wages and implement wider supports to improve workforce conditions.”


  • There has been a severe contraction in the family day care (FDC) segment of the sector, and pricing models for in-home care are seen as prohibitive. 


  • A ‘one size fits all’ approach to Government regulation and intervention isn’t working, and is unlikely to deliver government objectives or meet community expectations across all childcare markets in Australia.


“The ACCC agrees that our early childhood education and care system is not currently meeting the needs of Australian families and children,” Thrive by Five Director Jay Weatherill said.


“Markets alone have not been successful in tackling challenges with accessibility and affordability and, now more than ever, more assertive government intervention is necessary.”


“Early childhood education and care is an essential service, but for far too long it has not been treated as such and this must change.”


Recommendations for change


The recommendations for change identified in the report include (but are not limited to): 


  • That the Government reconsider and restate the key objectives and priorities of its early childhood education and care policies, including price regulation.


“Our sector has operated under very difficult circumstances as the cost of delivering the services has increased well and truly above indexation and CPI over the last four or five years. We are gratified that the ACCC acknowledges this important point,” ACA President Paul Mondo said, noting that the inquiry “has found that structural reasons have driven up costs across the whole sector, specifically wage operating costs and that there is no evidence of excessive profits across the sector.”


  • That the Government implements system and market stewardship, enabling it to tailor appropriate responses to under-served and unserved communities.


“For too long, families throughout Australia have struggled to find adequate, affordable, high-quality ECEC options. And in some regional and rural areas, there can be a lack of services. Strong system stewardship creates conditions to remove barriers to access ECEC, especially in remote, rural, disadvantaged, and First Nations communities who have been underserved for too long,” Ms Hunt said. 


  • That the Government determine an appropriate base for the hourly rate cap and ensure it is indexed to more closely reflect the changing costs of delivering ECEC, including labour costs.


  • That the Government removes, relaxes or substantially reconfigures the current activity test.


“The activity test prevents 126,000 children from benefiting from early education, disproportionately impacting children experiencing disadvantage,” Ms Hunt shared


“Improving access and affordability will also be enhanced with supply-side funding, which the ACCC calls for as a longer-term consideration.” 


  • That the Government further considers how the existing regulatory frameworks support and influence the attraction and retention of educators and workforce in the sector.


The end of a rigorous review 


Many of the respondents praised the ACCC for the inquiry process, and for the way in which the rigorous and intensive year-long inquiry was carried out, with two interim reports delivered in 2023. 


The ACCC inquiry stemmed from the Federal Government signalling its intention to bring reforms to the ECEC sector, and established a number of inquiries to help inform its decision making which were welcomed by the respondents. 


To view the final report please see here. For a summary of the key takeaways from the report, see here

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