All children in Australia under the age of five should be able to access at least three days of childcare a week regardless of their parents’ work and income circumstances, the Productivity Commission has said.
Labor tasked the commission with investigating the design of an affordable, accessible, high-quality, universal early education system in February, including a universal 90% subsidy rate to families for childcare fees, which the Albanese government has floated as an aspiration.
In its first draft report, released on Thursday night, the commission said the federal government should ensure all children were able to access at least three days of childcare a week, regardless of their parents’ circumstances, under a universal system.
“The system can only be universal if every child is welcome,” the commissioner, Martin Stokie, said. “The Australian government should increase funding to enable the inclusion of all children regardless of their ability or cultural background.”
The associate commissioner, Deborah Brennan, said: “A child’s entitlement to at least three days of ECEC [early childhood education and care] a week should not depend on how much their parents work.
“Providing further support for lower‑income families will ensure that cost does not prevent children from accessing education and care.”
Labor’s own childcare changes, an election promise that came into effect in July 2023, increased the subsidy to 90% for families with income under $80,000. The subsidy tapers down from 90% for households that bring in above that threshold, depending on income.
The Productivity Commission recommended further raising the maximum rate of the childcare subsidy to 100% for households on incomes up to $80,000, which the commission said accounted for about 30% of all families with young children. The report also recommended relaxing the activity test on accessing the childcare subsidy so it does not present as a barrier to accessing care.
It said it would conduct further modelling and analysis of a possible universal 90% subsidy, though it noted the main beneficiaries would be higher-income families, as many low-income families already receive subsidies at 90% or higher. The commission has also been asked to consider any workforce participant benefits of childcare reform.
Its report found children experiencing disadvantage and vulnerability were most likely to benefit from early childhood education but least likely to attend.
Children with a disability and those from diverse cultural backgrounds, including Aboriginal and Torres Strait Islander children, are not supported effectively by the government to be able to access inclusive early education and care services, the report found. Many services are also not flexible or accommodating enough to meet the needs of children and their families.
Early childhood educators have previously told Guardian Australia the country is facing a crisis at its childcare centres, with severe staffing shortages putting the safety of children and babies at risk. Centres across the country have been struggling to fill thousands of available positions as educators leave due to post-pandemic burnout and the sector’s notoriously low pay.
Families have described the difficulties they have in accessing appropriate, affordable and local care for their children, with lack of availability in regional and rural areas in particular affecting women’s ability to return to the workforce, including to help fill critical gaps in essential services.
The commission’s report said universal childcare could not be achieved “without addressing the critical demand and need for educators, early childhood teachers, centre directors and other ECEC workers”.
Early childhood education and care costs Australian governments about $13bn a year, with the commonwealth covering the bulk – about $10.3bn in 2021-22 – mainly through the childcare subsidy. State and territory governments fund preschool and some other services prior to children attending full-time school.
Unlike other essential services such as primary education, early childhood education and care don’t get funding directly from the government but rely instead on federal subsidies that come through eligible enrolled families. Some experts have previously blamed this demand-side subsidy-based business model for the sector’s poor performance.
The commissioners recommended governments at federal, state and territory level should sign a new national partnership agreement on early childhood education and care to outline their roles and responsibilities “as stewards of the system”.
The commission’s report follows two interim reports from the Australian Competition and Consumer Commission, released earlier this year, which found childcare in Australia was more expensive for households than most other OECD countries.
The Productivity Commission’s final report is due to be handed to the federal government by the end of June next year.
The review was a commitment of the childcare reform package Labor took to the last federal election, which included a promise for cheaper childcare.
