Divergence between LDC supply and LDC demand expands again according to latest DoE data

The divergence between the annual growth rate in children’s attendance (demand) at a long day care (LDC) service and the annual growth in new centres opened (supply) continues to expand according to new data released by the Department of Education.

In the three months to September 2024 growth in the number of children attending a LDC was the slowest in two years at just 0.8 per cent, despite the number of new LDC services opening in the period increasing by 3.8 per cent, the highest in just under three years. 

The gap between the combination of slowing demand, as measured by attendance, and rising supply, as measured by new openings has now expanded to 3.0 per cent, a meaningfully higher divergence that suggests operating fundamentals across the sector continue to be challenging for providers. 

Importantly, these trends are emerging at a time when Child Care Subsidy (CCS) disbursements are surging and overall out of pocket costs for families on a national basis are still below those recorded prior to the introduction of the Cheaper Child Care measures introduced in July 2023. 

The persistent divergence between demand growth and supply growth since the 2021 has contributed to the gradual erosion in the average number of children attending an LDC service, which prior to 2020, was more or less stable over extended periods of time. 

That being said, what is so striking about this current phase of the LDC sector is that the divergences created are not a function of excessively high supply growth. At around 3.8 per cent growth per annum, current supply of new centres being recorded are at the lower end of the last ten year band of 3.0 per cent to 7.0 per cent. 

It is instead a function of lacklustre growth in enrolments over the two years or so prior to September 2024, a period that was marked by a “normalisation” in conditions as COVID receded, a “cost of living” crisis as inflation spiked and a surge in child care subsidy spend as the Cheaper Child Care Bill legislation was implemented. 

Although the highly localised nature of the early learning sector in Australia provides multiple examples of localised catchments where supply and demand dynamics can and will be favourable for providers, there is little doubt that at a macro level indicators are signalling that the fundamentals of the early learning sector, for the time being, are on the wane.