ACCC’s Childcare Report

Finance
 30 Jan 2024

The Australian Competition & Consumer Commission has released its final report for the childcare inquiry, and KindiCare is here to take you through it.    

BY HEJIRA CONVERY, KINDICARE

JANUARY 31, 2024

Treasurer Jim Chalmers directed the ACCC to conduct an inquiry into childcare pricing back in October 2022, and although they’re a bit late with their final report, the ACCC has delivered. 

Last year, they released two interim reports (in July and October) and on 29 January 2024, their final report was made public.  

It contains findings and recommendations to improve our childcare system for the good of everyone involved, and because us parents are emotionally and financially invested in the education and care of our children, it’s good for all of us to see the final result of the ACCC’s lengthy investigations.  

After closely examining the state of play of our childcare system, the ACCC has made 31 findings in its final report for the childcare inquiry. 

Most crucially, they have found that our current childcare markets simply aren’t delivering accessible and affordable childcare for all Australian families. 

While some childcare markets are adequately served, others are under-served or unserved; and the ACCC has found that children from lower socio-economic areas and remote and rural areas aren’t participating in formal early learning at the same rate as those in major cities. 

There’s been a noticeable move away from family day care towards centre-based care, and no matter which childcare type families are choosing, cost remains a key issue.   

The ACCC confirms that fees have grown faster than inflation and wages since the Child Care Subsidy (CSS) was introduced, and although Labor’s Cheaper Child Care Plan did reduce our out-of-pocket costs in 2023, fee increases quickly eroded the savings that came with the CCS increases. 

The ACCC has also found that the hourly rate cap that was put in place to try and contain fee increases to a certain level, has been mostly unsuccessful in keeping prices down. 

And let’s not forget the impact of increased wages and staff shortages!  

The ACCC has found that labour costs have increased significantly in recent years, and labour is the main driver of the cost for supply of childcare (with rent also having a substantial impact). 

Meanwhile, workforce shortages in the childcare sector are affecting the availability and cost of childcare services, and this is particularly obvious in regional and remote areas, where staffing constraints make it more challenging for providers to set up services or expand their operations. 

 

With all of this in mind, the ACCC has come up with eight recommendations for the government to take on board.  

The ACCC does urge a bit of caution, because changing one aspect of the childcare system can have wide-ranging effects across the sector, and they recognise that a one-size-fits-all approach won’t fix our childcare system across the board.  

However, the ACCC’s recommendations do promise to change our childcare system for the better. 

They’re encouraging the Federal government to take a good look at its childcare policies and supporting measures, including the price regulation mechanism. 

And they have some solid recommendations when it comes to the operation of the CCS, the incentivisation of childcare workers, and the role of governments. 

You can read all the detail in the report if you like, but here are some key takeaways: 

The ACCC is recommending that the Federal government simplifies the CCS and hourly rate cap.

This means the hourly rate cap could be changed to a daily rate cap for centre-based services to make their prices more transparent, and there’s a call to change, relax or totally remove the CCS activity test 

Here at KindiCare, we recognise that the activity test can stand in the way of some children accessing childcare, and some parents re-entering or fully participating in the workforce; and our Founder and CEO, Benjamin Balk says. "Many in the sector, including KindiCare, have been advocating for the activity test to be abolished.”  

Under this recommendation, the ACCC says governments could also take on a stronger role in monitoring childcare providers’ pricing, costs, profits and outcomes to put downward pressure on fees, with a real threat of regulatory intervention.  

In light of the chronic and persistent workforce shortages, the ACCC is also recommending that the government review the current regulatory frameworks to support the attraction and retention of early childhood educators.  

Mr Balk says, “There might well need to be additional incentives to attract early learning educators and staff to regional and remote areas, as this is a primary barrier to providing childcare in these areas.” 

The ACCC also recommends that the Federal, State and Territory governments think about taking on a  market stewardship role to monitor childcare markets, look at outcomes, and take action where necessary.  

This stewardship role could mean that interventions, like demand-side subsidies and/or supply-side subsidies, might be used make childcare more accessible.  

Mr Balk says, “The primary way to increase availability of childcare services in remote and regional areas, and those lower socio-economic areas, is to provide direct subsidies to childcare providers to make services in those areas viable.” 

So, where to now? 

Now that the ACCC has handed its final report to government, the next piece in the childcare reform puzzle is the Productivity Commission’s inquiry into Australia’s early childhood education and care system 

They are expected to hand down their final report to government on 30 June 2024, and after that time, we can wait and see what recommendations the government takes on board and how they make our childcare system more accessible and affordable for all.  

Already, it’s very good to see that the Productivity Commission is recommending all under-fives get access to up to three days per week of high-quality early childhood education and care, with zero-cost childcare for low-income families. 

This is something we definitely support at KindiCare, and together with other industry advocates, like Thrive by Five and The Parenthood, we’re backing a legislated entitlement to early learning.    

Mr Balk says, “We’d like to see a legislated entitlement to three days of early learning for every Australian child, no matter where they live, or the work activity of their parents or guardians.  

“This will create the positive change our system needs, and enshrine our children’s education and care needs in law, safe from changing governments, for the good of our current and future society.”