Industry Overview

Childcare in Australia is a continuously developing industry that has undergone significant growth over the past decade. Despite this growth, the industry is characterised in many instances by a shortage of services through an overwhelming increase in consumer demand.

Recognised as a form of social infrastructure in a manner similar to schools, childcare is now integral to the economy as a vital component in maintaining the workforce participation rate and as a stimulant to economic growth. Most recent estimates indicate that the childcare industry now provides services to approximately 750,000 children, employs over 82,000 people and generates turnover estimated at $3.2 billion.

The evolution of childcare in the past decade has been in response to overwhelming demand and government policy that has seen the private sector become the primary investor and originator of childcare facilities. With demand outstripping supply in many areas and in an industry where ownership is highly fragmented, childcare is now approaching maturity.

Historically low unemployment levels have been the catalyst for the increasing demand since the mid 1990s. This has seen a directional shift in the origination of childcare services, which together with the Federal Government’s user funded format, has resulted in a movement away from family and community based care which has been unable to adequately meet the capital costs required to build facilities to meet demand.

What is the role of the Federal Government?

The Australian childcare sector is financially supported by the Commonwealth Government and regulated by both the commonwealth and the states. The relevant Commonwealth department is the Department of Education, Employment and Workplace Relations (DEEWR).

A key objective of the Commonwealth’s program is to assist families with dependent children to participate in the workforce and general community by supporting the provision of affordable quality childcare.

Both Federal and State Governments have committed to making early childhood an area for national reform through the Council of Australian Governments (COAG). A National Partnership Agreement on Early Childhood Education, provides $970 million in Australian Government funding to ensure that by 2013 every child has access to a quality early childhood education program in the year before formal school (known as preschool or kindergarten). $955 million of this funding will go to State and Territory governments. There will be ongoing funding of $450 million a year once Universal Access has been achieved by 2013.

Is the demand for childcare increasing?

According to the Federal Government, the estimated proportion of children in the year before formal school using state government funded and/or provided preschool services is expected to increase from the existing 70 per cent to 95 per cent in 2012-2013 which highlights the recognition of the importance of early learning and an expectation of an increased participation rate in the sector.

What are the key drivers to childcare in Australia?

The key drivers behind Australia’s childcare industry are:

• Increasing recognition of the importance of early learning before primary school, in particular the first five years of life;
• Social change – increased numbers of two income households, higher education levels and delayed childbirth, all favour a family’s decision to utilize childcare to reduce time out of the workforce;
• Significant government funding for childcare (upwards of A$9.5 billion) This has increased from A$1.646 billion in 2001-02;
• Government policy that promotes private sector development of childcare infrastructure through indirect funding via family tax benefits rather than direct subsidies; and,
• Continued population growth in Australia and a movement toward a higher proportion of dual income households.