New supply, softer occupancy: what December quarter data suggests about shifting childcare markets

Australia’s centre based day care market appears to be entering a more uneven phase, with new analysis of December quarter data pointing to a clear pattern: occupancy is softening in several states, and the driver is not demand, it’s supply.

A review of publicly available Child Care Subsidy data and National Quality Framework Snapshot materials suggests national centre based day care occupancy has fallen from an estimated 81.8 per cent in December 2023 to 76.1 per cent in December 2025.

The national trend is notable, but the state‑level picture is where the real story emerges.

Western Australia: the sharpest decline

Western Australia stands out as the most dramatic example of market imbalance.

Estimated occupancy fell from 82.3 per cent in December 2023 to 70.5 per cent in December 2025, a significant shift in a relatively short period.

Over the same two years:

• approved places increased by an estimated 17.6 per cent, and
• the number of children using centre based day care remained broadly flat.

This combination, rapid supply growth and modest demand growth, suggests WA is now operating in a structurally different market from the eastern states. Participation among children aged 0–5 remains comparatively low, meaning new places are entering a market that does not yet have the depth to absorb them.

South Australia and Victoria: material softening

South Australia and Victoria also recorded meaningful declines.

• South Australia: 77.1% → 70.3%
• Victoria: 78.3% → 72.2%

Both states have seen strong growth in approved places over the past two years. In many local markets, this has outpaced population growth, participation increases and workforce availability.

The result is a growing number of services competing for the same pool of families.

Queensland and New South Wales: softer, but more stable

Queensland and New South Wales also softened, though less sharply:

• Queensland: 83.0% → 79.4%
• New South Wales: 85.0% → 80.3%

Both states continue to experience strong population growth and relatively high participation rates, which may be cushioning the impact of new supply. However, even in these markets, the trend is downward.

This suggests the national picture is not driven by isolated pockets of oversupply, it is a broader structural shift.

The Q1 2026 ACECQA National Quality Framework Snapshot adds another layer to this picture. While the Child Care Subsidy data points to softer utilisation across several markets, ACECQA’s latest figures confirm the sector continues to expand, with 18,207 approved services operating under the NQF, a 1 per cent increase on Q1 2025.

The Snapshot shows that the operating environment around providers is becoming more complex, with statutory compliance actions rising from 574 in Q1 2025 to 933 in Q1 2026.

In other words, services are navigating softer occupancy in some markets at the same time as heightened regulatory, governance and workforce expectations.

A market structure issue, not a service issue

The analysis reinforces a key point:

occupancy pressure is increasingly a market‑level issue, not a service‑level issue.

In several states, the number of approved places is growing faster than:

• the number of children using care
• participation rates
• population growth
• workforce capacity
• local demand in specific catchments

This means even high‑quality, well‑run services may experience occupancy softening simply because the market around them has changed.

What this means for providers

Lower occupancy affects far more than revenue. It influences:

• fee‑setting and discounting behaviour
• rostering and workforce planning
• wage affordability
• investment in quality improvement
• service viability in competitive catchments
• acquisition and development decisions

In markets where new supply is concentrated, even small shifts in occupancy can reshape the competitive landscape.

This is occurring at a time when providers are already managing:

• rising labour costs
• workforce shortages
• regulatory change
• increased child‑safety expectations
• uncertainty around future workforce funding settings

The combination of softer occupancy and rising costs creates a challenging operating environment.

Why more nuanced demand planning is needed

Headline demand for early childhood education and care does not automatically translate into sustainable occupancy at service level.

Local outcomes are shaped by:

• supply pipelines
• family affordability
• workforce availability
• demographic shifts
• participation patterns
• transport and accessibility
• competition within small catchments

This means national or state‑level demand growth can mask local oversupply.

For policymakers, the data raises important questions about:

• how new supply is targeted
• how markets are monitored
• whether additional places are being delivered where they are most needed

For providers, the message is equally clear:

state‑level and local market analysis will become increasingly important in strategic planning.

Occupancy trends are early signals

In a sector where quality, workforce stability and financial viability are closely linked, occupancy trends are not just commercial indicators.

They are early signals of the operating conditions services will need to navigate in the years ahead.

Sources

• Department of Education — Child Care Subsidy Data Report, December Quarter 2025
• ACECQA — National Quality Framework Snapshot Series