NSW budget delivers $1.2b foster care overhaul with flow-on benefits for vulnerable children

A record $1.2 billion investment in New South Wales’ foster care system will bring long-overdue improvements to the lives of vulnerable children and young people and may carry important implications for those supporting children in early education settings.

Announced as part of the 2025 state budget, the reform package will increase financial support for foster carers, end the use of emergency accommodation such as motels and hotels, and prioritise stable, therapeutic care over short-term crisis placements.

The funding includes:

• A 20 per cent increase in foster care allowances the first in two decades adding $176 per fortnight for the carer of a typical 14-year-old, and raising the allowance for a five-year-old from $656 to $787;
• $800 million for reforms that enhance stability, safety and wellbeing in out-of-home care;
• $49.2 million to build 44 purpose-designed homes for children aged 12 and over with complex needs;
• Funding for an additional 300 caseworkers to better support children and carers;
• $10 million for the Office of the Children’s Guardian to strengthen safety oversight.

ECEC sector intersections

While the reforms focus on out-of-home care, the early childhood education and care sector is likely to see flow-on effects.

Children in care often attend ECEC services particularly preschool and long day care and are among the most vulnerable in terms of developmental and emotional support needs. Consistent, high-quality early learning environments play a critical role in their sense of stability, belonging and recovery from trauma.

The additional caseworker roles and a renewed focus on therapeutic care may improve coordination between early childhood educators, carers and support services, ultimately leading to more informed, child-centred approaches in education and care settings.

Services welcoming children in care may also benefit from increased clarity, communication and access to resources through improved case management frameworks.

Responding to systemic failure

The overhaul follows the findings of the 2024 Moving Cage to Cage report from the Advocate for Children and Young People, which highlighted serious failings in temporary care placements. The report included accounts of sexual abuse, disrupted schooling and young people feeling they were being “shuffled like a dog from cage to cage.”

NSW Treasurer Daniel Mookhey said the budget recognises that children in care deserve more.

“Those with love to give a child needing foster care should have the financial means to do so,” he said.

The state government will also end outsourced emergency care placements that were previously managed under the Permanency Support Program, redirecting funds towards permanent, regulated options.

The move signals a shift toward prioritising long-term wellbeing and safety over reactive placements, with a clear focus on trauma-informed, therapeutic care models.

To access the full NSW 2025–26 State Budget visit here.

To read the Moving Cage to Cage report from the Advocate for Children and Young People, visit here.