ACCC Childcare Sector Challenges

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Sydney, Oct 1: The Australian Competition and Consumer Commission (ACCC) has published its second interim report, shedding light on the childcare landscape in the country.
The report reveals that market forces alone have struggled to meet the expectations of both the community and the government when it comes to childcare services and policies.
Gina Cass-Gottlieb, Chair of the ACCC, underscored the significance of quality childcare for Australian families.
She emphasized that early childhood education plays a pivotal role in children’s development and enables parents and guardians to work and pursue further education.
One of the primary findings of the report is the uneven distribution of childcare services across Australia. Market dynamics tend to favor socio-economically advantaged areas and major cities, where parents have greater financial capacity. Consequently, remote and lower-income communities face a shortage of childcare facilities.
Price sensitivity also emerged as a key factor affecting parents’ choices.
While price plays a significant role in deciding on childcare, parents tend to focus on services priced around the prevailing market rate, seeking value for money while considering quality perceptions.
The report notes that lower-income households are more responsive to price changes, as increased childcare expenses have a disproportionately larger impact on their overall income.
The current activity test, which determines eligibility for subsidized childcare hours, has been found to impact demand significantly. Low-income households, in particular, face higher out-of-pocket costs when they seek to increase their hours of employment and require more childcare.
Despite rising costs in the sector, the report indicates that childcare providers continue to operate profitably.
Labor costs constitute a major portion of expenses in providing childcare services, accounting for 69 per cent of center-based daycare costs and 77 per cent of outside school hours care costs.
The cost of providing center-based daycare has risen by an average of 27 per cent over the past five years.
Another crucial aspect highlighted in the report is the shortage of childcare educators and their decisions to leave the sector. This shortage has a direct impact on the supply of childcare services, profitability, long-term viability, and service quality.
In an international context, the report reveals that childcare in Australia is less affordable compared to most other OECD countries.
In 2022, an average Australian couple with two children spent 16 per cent of their net household income on childcare costs, compared to the OECD average of nine per cent.
Many countries are responding to this affordability challenge by increasing investment in childcare and moving toward greater regulation of childcare fees.
The ACCC recommends a comprehensive reevaluation of childcare policy settings and seeks feedback from various stakeholders, including childcare providers, educators, families, and community organizations.
Additionally, the ACCC suggests that the government consider maintaining and expanding supply-side options, including direct subsidies for Aboriginal Community Controlled Organizations providing childcare services for First Nations children.
They also advocate for a market stewardship role for the government in areas where there is an undersupply of childcare services.
The ACCC report underscores the complexities of the childcare sector and the need for a multifaceted approach to address the diverse needs of families across the country.
The government’s role in policy adjustments and support measures is crucial in achieving accessible and affordable childcare for all Australian children.

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