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Childcare and Early Childhood Learning

Draft report

This report was released on 22 July 2014. You were invited to examine the draft report and to make written submissions and to participate in public hearings.

This inquiry has concluded. The final report was sent to Government on 31 October 2014 and publicly released on 20 February 2015.

Please note: This draft report is for research purposes only. For final outcomes of this inquiry refer to the inquiry report.

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  • Key points
  • Media release
  • Contents
  • Formal and informal Early Childhood Education and Care (ECEC) services play a vital role in the development of Australian children and their preparation for school, and in enabling parents to work. Many parents use a mix of care types and/or choose to care for their children at home.
  • The number of ECEC services has expanded substantially over the past 5 years. Australian Government funding has escalated to around $7 billion per year, and covers two thirds of total ECEC costs. However, many parents report difficulties in finding ECEC at a location, price, quality and hours they want.
  • ECEC issues are just some of a broad range of work, family and financial factors which influence parent work decisions. The interaction of tax and welfare policies provide disincentives for many second income earners to work more than part time.
  • The benefits from participation in preschool for children's development and transition to school are largely undisputed. There also appear to be some benefits from early identification of, and intervention for, children with development vulnerabilities.
  • The National Quality Framework for ECEC services must be retained, modified and extended to all Government funded services. To better meet the needs and budgets of families, the range of services approved for assistance should include approved nannies and the cap should be removed from occasional care places. All primary schools should be directed to provide outside school hours care for their students, where sufficient demand exists for a viable service.
  • Government assistance should focus on three priority areas:
    • Mainstream support should be a single child-based subsidy that is: means- and activity- tested, paid directly to the family's choice of approved services, for up to 100 hours per fortnight, and based on a reasonable cost of delivering ECEC for each age of child in different ECEC types. In regional, rural and remote areas with fluctuating child populations, viability assistance should be provided on a limited time basis.
    • Children with additional needs should have access to a 'top-up' subsidy to meet the additional reasonable costs of service. Services should have access to assistance to build capacity to provide ECEC for: individual additional needs children, for children in highly disadvantaged communities and to facilitate the integration of ECEC with schools and other services.
    • The Australian Government should continue to support the states and territories for all children to attend an approved preschool program in the year prior to school.
  • Given the broader welfare settings, recommended changes to ECEC assistance and accessibility can only do so much to improve workforce participation.
    • Labour supply is estimated to rise by 0.4 per cent (an additional 47 000 workers).
    • The cost to Government of the preferred settings for ECEC assistance is estimated at $8 billion per year. This is slightly above the forward budget estimates, but the Commission has also included analysis for assistance arrangements that are likely to be within the Government's ECEC funding envelope.
    • The GDP impact is, at most, 0.4 per cent (an additional $5.5 billion).

Further information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Childcare and Early Childhood Learning Draft Report Released

The Productivity Commission today released its draft inquiry report on Childcare and Early Childhood Learning.

'Our recommendations seek to make childcare more affordable, flexible and accessible. Furthermore they will provide a framework for a more financially sustainable childcare system for taxpayers into the future,' Presiding Commissioner Dr Wendy Craik said.

The Childcare and Early Childhood Learning report is a draft report and the Productivity Commission will continue to seek feedback before this report is finalised at the end of October this year.

'It was clear from our research and the many comments and submissions that we received that childcare and early childhood learning play a vital role in both child development and workforce participation. However, our current system does not meet the needs of all families and the costs of supporting the current childcare system are increasing at an unsustainable rate for taxpayers,' Dr Craik said.

The report proposes three key areas of funding for Childcare and Early Childhood Learning (Childcare): Mainstream childcare services; Children with disabilities and additional needs; and Preschool.

'Some of our key recommendations include replacing the current multiple childcare subsidies with a single subsidy that would be paid directly to the parents' choice of provider, and be means and activity tested. The subsidy would be based on a set reasonable cost of care,' Dr Craik said.

The recommendations for means testing a single childcare rebate would still see all eligible families receiving a minimum of 30% of their reasonable childcare fees reimbursed by taxpayers. Further options for assistance however remain under consideration.

'Means-testing the childcare rebate will mean that more families on very low incomes will pay less for their childcare than they do now. We expect low income families would see around 90% of their reasonable childcare fees paid by Government,' Dr Craik said.

Other key recommendations from the draft childcare report include:

  • Nannies being eligible for childcare subsidies subject to appropriate qualifications (au pairs would not be eligible).
  • Removing restrictions on the number of child care places for occasional care and the hours that centres have to be open in order to receive Government subsidies.
  • School principals being responsible for ensuring schools offer before and after school care, including care for preschoolers.
  • A continuation of Government support for access to preschool for all children in the year before starting school.
  • Increasing funding and subsidies for children with disabilities and additional needs.

'The Productivity Commission supports retaining the National Quality Framework and extending it to other subsidised services but it needs to be more flexible and targeted for the types of services provided,' Dr Craik said.

The Productivity Commission's preliminary economic modelling found that implementation of their measures would most likely result in up to 47 000 more full-time people entering the workforce. The economy-wide impacts of this are likely to be relatively small, with a GDP impact of, at most, an additional $5.5 billion, but the social significance of this should not be underestimated.

The Commission is inviting submissions on the draft report, its recommendations and information requests by 5 September 2014. The Commission will hold public hearings in various locations during August.

Please note the draft report, a Video News Release (VNR) and additional video footage is available to view at . The draft report will be available for general viewing at from 12.15 am, Tuesday 22 July.

Further information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

  • Preliminaries
    • Cover, Copyright and publication details, Opportunity for further comment, Terms of reference, Disclosure of interest, Contents, Acknowledgments and Abbreviations and explanations.
  • Overview
  • Draft recommendations, findings and information requests
  • Chapter 1 About the inquiry
    • 1.1 Background to the inquiry
    • 1.2 What has the Commission been asked to do?
    • 1.3 Desired features of an ECEC system
  • Chapter 2 ECEC service providers
    • 2.1 What services are being provided
    • 2.2 Approved services
    • 2.3 Preschool services
    • 2.4 Registered care providers
    • 2.5 Other service providers
  • Chapter 3 Family use of childcare and early learning
    • 3.1 The nature of non-parental care in Australia
    • 3.2 Use of non-parental care to facilitate workforce participation
    • 3.3 Use of non-parental care for developmental reasons
    • 3.4 Future demand for ECEC services
  • Chapter 4 Government assistance to early childhood learning and care
    • 4.1 Funding to meet the objectives of ECEC
    • 4.2 Australian Government assistance
    • 4.3 State and Territory Government assistance
    • 4.4 Local Government assistance to ECEC
  • Chapter 5 Childhood learning and development
    • 5.1 What facilitates children's learning and development?
    • 5.2 How are Australian children doing at present?
    • 5.3 Meeting the development needs of children
    • 5.4 What are the benefits to the individual and the wider community from attending ECEC
  • Chapter 6 Workforce participation
    • 6.1 Introduction
    • 6.2 The workforce participation of parents
    • 6.3 What scope is there for increasing the workforce participation of mothers?
    • 6.4 Workforce participation and future childcare needs
    • 6.5 Options to support the workforce participation of parents
  • Chapter 7 Regulation of ECEC providers
    • 7.1 Rationales for regulating ECEC
    • 7.2 The National Quality Framework
    • 7.3 Other regulations affecting ECEC
  • Chapter 8 Accessibility and flexibility
    • 8.1 How accessible are current arrangements?
    • 8.2 Accessibility for children with additional needs
    • 8.3 How flexible are current arrangements?
    • 8.4 Summing up
  • Chapter 9 Affordability
    • 9.1 How much do families pay for ECEC?
    • 9.2 The design of current assistance arrangements for families
  • Chapter 10 The market for childcare services
    • 10.1 Introduction
    • 10.2 How do childcare markets function?
    • 10.3 The responsiveness of childcare supply
    • 10.4 The impact of government support on childcare markets
  • Chapter 11 ECEC Workforce
    • 11.1 The ECEC workforce
    • 11.2 Pay and conditions
    • 11.3 Recruitment, retention and workforce shortages
    • 11.4 Training and development
  • Chapter 12 Funding options
    • 12.1 Commission's approach to evaluating funding options
    • 12.2 Different funding models
    • 12.3 Managing the cost to government
    • 12.4 Proposed funding arrangements
    • 12.5 Current funding arrangements
  • Chapter 13 Potential impacts of proposed changes
    • 13.1 Proposed approach to funding the system
    • 13.2 Estimated cost of the funding options
    • 13.3 Estimates of changes in the cost to families
    • 13.4 Estimates of the effect on workforce participation
    • 13.5 Estimates of changes in use of ECEC services
    • 13.6 Estimates of the fiscal impact for government
    • 13.7 Longer term impacts
    • 13.8 Transitional arrangements
    • 13.9 Administrative changes
  • Appendix A Conduct of the inquiry
  • Appendix B Disadvantaged children
  • Appendix C Current assistance measures
  • Appendix D Workforce participation data
  • Appendix E Unmet demand for ECEC
  • Appendix F Workforce participation elasticities
  • Appendix G Effective Marginal Tax rates
  • Appendix H The National Quality Framework
  • Appendix I International approaches to ECEC
  • Appendix J The costs and viability of childcare operations
  • Appendix K A cost benefit framework
  • References

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