ACCC releases its final childcare inquiry report – What were the key takeaways?

The Australian Competition and Consumer Commission (ACCC) has released its final Childcare Inquiry report, presenting a set of eight key recommendations with particular emphasis placed on the need for a stewardship model to be created for the early childhood education and care (ECEC) sector. 

Many of the recommendations were more or less consistent with those presented in the second interim report with an additional recommendation added encouraging Government to design policy options that better meet the needs of children using in-home care. 

Overall the final report contained few surprises but did include some notable takeaways:

Takeaway 1 – Direct price controls as a policy measure now seems increasingly unlikely 

As part of the draft recommendations in the interim report the ACCC noted that it supported the need for “further consideration of supply-side subsidies and direct price controls” in the wake of changes to policy settings that are likely to reduce the impact of the hourly rate cap as an indirect price control.

However, reference to price controls was removed from the final recommendation which instead noted that the ACCC “supports further consideration of the benefits and challenges of supply-side subsidies (particularly as a longer term consideration) coupled with other more direct forms of market intervention as appropriate.”

Comment – The omission of direct price control measures in the ACCC’s final recommendations reflects a more nuanced understanding of the actual problems in the sector, the challenges of implementation and also importantly the absence of inclusion in the Productivity Commission’s interim report which favoured evolving the current framework not replacing it. 

Takeaway 2 – Nevertheless there are problems with the system that need addressing

Although the ACCC’s inquiry did not uncover sufficient evidence of wrongdoing on behalf of providers that would justify the introduction of price controls there was an abundance of additional evidence that confirmed accessibility and affordability objectives are not being met. 

Some examples include; lower income families paying proportionally higher out of pocket expenses and exhibiting lower participation rates, less centres located in remote and very remote areas, barriers for First Nations families to attend care, the severe contraction in family day care and prohibitive prices of in-home care. 

Comment – Many of these issues are well understood by the sector and policy makers, however affecting change will require policy level adjustments that can only be made once independent arbiters like the ACCC and Productivity Commission highlight them in black and white. 

Takeaway 3 – Segmenting care users greatly improves policy targeting efficacy

The recognition by the ACCC that ECEC users can be broadly segmented into three categories (adequately served, under-served, or unserved) that reflect their geographic and local areas and in turn whether their affordability and accessibility needs are being met is a significant step forward. 

The ACCC notes its view that these different types of markets will require a different mix of government interventions if governments’ objectives and the needs of local communities and particular cohorts of users are to be met.

Comment – It is becoming increasingly clear that ‘one size fits all’ does not work in the ECEC sector and that policies such as the Child Care Subsidy, and the incentives built into it, will inevitably leave some communities behind. By acknowledging that the different cohorts exist, the ACCC is opening the door to targeted policies that address the specific needs of communities whilst retaining the status quo for those that are adequately served. 

Takeaway 4 – A new Government stewardship model is needed to support the sector

As policy becomes more nuanced and targeted the ACCC believes strongly that a steward is required to oversee the sector and help develop appropriate measures that suit the needs and characteristics of local communities and enable broader policy objectives to be met.

The ACCC recommends that a market stewardship role – undertaken by an appropriate body yet to be determined – should encompass active oversight and management of issues relevant to the ECECsector including market monitoring, policy determination and application, workforce support, quality monitoring and outcomes tracking. 

Comment – The creation of an overarching stewardship entity for the ECEC sector is the standout recommendation in the ACCC inquiry report. Importantly, the recommendation refers to both Australian and state and territory governments as being key agents in the process and, should it be implemented, would more than likely see the role of ACECQA recast or absorbed into the broader entity. 

Takeaway 5 – Workforce issues are still very much on the agenda 

The ACCC continued to recommend that governments further consider how the existing regulatory frameworks support and influence the attraction and retention of educators and workforce in the ECEC sector.

The report notes that the availability and quality of educators and staff delivering ECEC services has a significant impact on the quality, reputation and profitability (through influencing occupancy) of a service with a stable tenure and continuity of staff also contributes to service viability.

Comment – The ACCC’s insistence that workforce shortages can and do impact achieving policy objectives re-raises the importance of solving for the current labour shortages. Although the ACCC did not explicitly reference ongoing educator wage increase negotiations, unlike the Productivity Commission who did, the very fact that shortages were mentioned maintains the narrative that change must be forthcoming in this area going forward. 

To review the report click here.