Recapping Productivity Commission’s Draft Report Recommendations and Observations as ECEC sector awaits Final Report

As the early childhood education and care (ECEC) sector awaits the release of the Productivity Commission’s (PC) final report the team at The Sector team felt it would be valuable to recap the initial recommendations in the draft report. 

 

Understanding and internalising the key messages and ideas presented in the PC’s Draft Report will be of value to policy makers and stakeholders amidst an anticipated step up in alternative visions offered by “think tanks” and also the possibility that initial recommendations made by the PC in its final report evolve. 

 

This piece will serve as a primer seeking to cover key areas of interest through a series of questions.

 

Why was the Productivity Commission originally asked to review the ECEC sector?

 

The idea of an inquiry was first raised formally as a pre-election pledge made by Anthony Albanese in his budget reply speech in October 2021, when he committed to launching 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.

 

Fifteen months later, and with the Federal Election having been won, Federal Treasurer Jim Chalmers formally instructed the PC to conduct an inquiry into the ECEC sector and released a detailed Terms of Reference outlining its scope, process and timeline.

 

What was the PC tasked with by the Chancellor?

 

Specifically, the Commission was asked to make recommendations to support affordable, accessible, equitable and high-quality ECEC that reduces the barriers to workforce participation and supports children’s learning and development, as well as to consider a universal 90 per cent child care subsidy (CCS) rate. 

 

The terms of reference also highlighted that recommendations be provided on options that improve or support, affordability, developmental and educational outcomes, economic growth, outcomes for children and families experiencing vulnerability and/or disadvantage, First Nations children and families, and children and families experiencing disability and the efficiency and effectiveness of government investment in the sector.

 

What was the timeline and process to be followed?

 

The Commission commenced the enquiry on 1 March 2023, provided a Draft Report in November 2023, and is expected to deliver a Final Report to the Government by 30 June 2024.

 

What was the PC’s Draft Report? Was it credible?

 

While the above provides some background as to how we got here it is important to take some time to recap key facts, findings and recommendations included in the PC’s Draft Report, a document that was 440 long, in which 101 pages were were dedicated to the Report itself, and 339 pages to supplemental information and data. 

 

As far as report creation is concerned the report represents a masterclass in data gathering, organising, processing and presenting and any reader should be assured that recommendations and conclusions drawn on the data are strongly evidence backed. 

 

What were the draft recommendations cited in the PC report?

 

There were thirty two recommendations made in the Report, which can be found here, but for brevity the PC condensed them into a set of key points:

 

1. Up to 30 hours or three days a week of quality ECEC should be available to all children aged 0–5 years.

 

2. Expanding the availability of ECEC will require governments to prioritise the workforce challenges facing the sector

 

3. The Australian Government should raise the maximum rate of the Child Care Subsidy (CCS) to 100 per cent of the hourly rate cap for families on incomes up to $80,000 and the CCS activity test should be relaxed so that it is not a barrier for any family – They add that this policy would cost $2.5 billion (20 percent increase in CCS) and lift demand by 12 per cent

 

4. ECEC services should be inclusive of all children, including those with disability and those from diverse cultural backgrounds

 

5. ACCOs require a sustainable funding model, which recognises their knowledge and expertise to deliver the ECEC priorities of their communities

 

6. Governments should remove impediments to the provision of flexible services, such as wrap-around care in dedicated preschools, and improve incentives for services to operate during non-standard hours

 

7. The operation of regulatory authorities should be independently reviewed, and where necessary, the Government should fund an increase in resourcing to enable them to deliver timely quality assessments and support continuous quality improvement

 

8. Australian, state and territory governments should sign a new National Partnership Agreement on Early Childhood Education and Care, which would outline their respective roles and responsibilities as stewards of the system

 

9. A new independent Early Childhood Education and Care Commission should be created to support, advise and monitor governments’ progress towards universal access to ECEC

 

In summary the authors added, “The reform agenda outlined in this report sets out a pathway to a universal system of ECEC. Delivering it will require careful implementation and sequencing. Addressing workforce issues will be fundamental to achieving universal availability.”

 

Were there any other notable aspects of the report outside of the recommendations?

 

Yes, there were several other key observations that were notable and helped inform the initial reception of the report. 

 

A. The PC recommendations are anchored in an evolved, not replaced, CCS system

 

Draft recommendations from the PC are built around evolving, not replacing, the current CCS system. Targeted policy adjustments, such as raising subsidy rates and abolishing the activity test, designed to address specific areas of focus, such as attendance rates and affordability issues in underserved cohorts and communities, are the preferred outcome. 

 

B. Calls to examine supply side funding models went unheeded

 

Despite a recommendation contained in the ACCC’s final report to further consider supply-side subsidies and direct price controls as a mechanism to mitigate shortfalls in rate caps, the PC refrained from commenting extensively on this area, instead pointing out that “policy goals would be more effectively achieved through relaxing the activity test and increasing the subsidy rate for lower income families.”

 

C. Universal subsidy rates and flat fee ECEC are not a panacea

 

In addition, the PC seemed to call out the effectiveness of universal 90 per cent subsidies or flat fee, low cost ECEC by stating that they disproportionately assist high income families, do not lead to significant increases in labour force participation, address the inequity created by the current CCS settings, nor support greater ECEC access for children and families experiencing disadvantage.

 

D. Workforce issues are central to success of meeting policy goals

 

Informed by the research and modeling conducted by the PC there is a deep understanding that achieving policy goals will see demand for ECEC places rise, and in turn place pressure on existing workforce availability. Therefore, pressure to ensure workforce pools are deep enough to support reform will continue to rise. 

 

E. National Vision for ECEC a core foundation of future ECEC agreements 

 

The PC calls out that the National Vision for ECEC ,as developed by the National Cabinet, is a relevant and useful foundation document to support coordination and collaboration between jurisdictions and levels of government across a future ECEC policy landscape. 

 

The PC is expected to pass the Final Report to the Treasurer on or before 30 June 2024 at which point a review by The Sector team will be forthcoming.