What can we expect for the ECEC sector in the upcoming Federal Budget?

With the Federal Budget fast approaching early childhood education and care (ECEC) stakeholders are starting to consider more carefully what outcomes and measures may be included that could impact them.

 

Interest is likely to be amplified this year after a relatively muted set of commitments in the 2023 Budget, ongoing building of anticipation around educator wage increases and a possible early election call in the second half of 2024. 

 

That being said, the following is a summary of the key issues with assigned probabilities of them being included. 

 

A commitment to fund educator wage increases – Moderate to high chance

 

Background and current status: 

 

Employer, employee and Government representatives have been locked in negotiations to agree on new pay and conditions for educators for the last six months. It is understood negotiations have been proceeding well but as yet no formal announcement has been made, due largely to uncertainty as to how much Government funding will be allocated to fund the increases. 

 

Expected cost:

 

In a report commissioned by the Australian Childcare Alliance and completed by Dandolo Partners the total cost of a fifteen per cent wage increase would be between $0.9 billion and $1.3 billion.

 

Conclusion:

 

The Government’s support for low paid, care based workforces, as well as affordable child care provide a strong basis for supporting this policy. When combined with the fact that the negotiation success is linked to Prime Minister Albanese’s signature Secure Jobs, Better Pay Bill as well as the precedent in place within the Aged Care sector this measure feels likely to be included in the Budget. 

 

A commitment to remove the CCS Activity Test – Moderate to low chance

 

Background and current status: 

 

The activity test was introduced as a key part of the new Child Care Subsidy (CCS) framework implemented in 2018. Reference in the Productivity Commission Interim Report to children most likely to benefit from ECEC attendance being the ones currently missing out as well as ongoing cost of living concerns has returned the Activity Test to the agenda ahead of the Budget. 

 

Expected cost:

 

In a report from Impact Economics and Policy released in March 2023 the estimated cost of removing the activity test was assessed at $1.3 billion in 2023/24. 

 

Conclusion:

 

It’s hard to see a measure that has previously failed to get passed Budget Review, was not directly called out in its entirety in the Productivity Commission report and would cost so much to implement getting into the Budget this year. It is possible that the current test is relaxed at some stage but the change is more likely to be as part of a  pre-election announcement rather than be included in the Budget. 

 

A commitment to fund a number of “free days” of child care – Low chance

 

Background: 

 

The ACCC recommended that further consideration be given to supply-side subsidies and direct price controls, which incorporate “free day” policies, as a way to address some of the affordability related shortcomings embedded in the CCS framework. 

 

Even though the Productivity Commission elected not to lean into supply side measures in its interim report the idea of introducing a “free day” policy option has persisted, likely spurred by cost of living concerns and policy application overseas (UK and Canada).

 

Expected cost:

 

Unclear but material in value when taken in consideration with the creation of the systems and bureaucracy required to administer it. 

 

Conclusion:

 

This measure is even harder to see in the upcoming Budget. Support for a blending of supply and demand side subsidy models from the Productivity Commission seems low, the current administrative systems are a long way from being able to accommodate a shift towards supply side and it would come at a very sizeable cost. 

 

Like the activity test it is possible for this to be included as a pre-election pledge at this election but given the reality of implementation it’s more likely to occur as part of the next election cycle assuming Labor wins, not this one. 

 

The Federal Budget 2024 will be handed down on Tuesday, 14 May.