The Productivity Commission has recommended a substantial increase in government spending on child care. Under the proposal, families earning up to AUD 80,000 would receive a full 100% subsidy under the Child Care Subsidy (CCS), covering approximately 30% of families with children up to 12 years old.
The Commission also suggests raising the Higher Child Care Subsidy (HCCS) to 100% for families with multiple children aged five and under, provided their income is up to AUD 140,000. The proposed plan includes a sliding scale where the subsidy rate decreases by one percentage point for every AUD 5,000 increase in income. Additionally, it recommends eliminating the activity test, arguing that young children’s education should not be dependent on their parents’ activities.
Released on Wednesday, the Commission’s final report, titled “A Path to Universal Early Childhood Education and Care,” outlines these recommendations. The government is expected to respond to the report soon, and Labor is anticipated to use these proposed changes to support its campaign for a second term.
The Commission states that nearly all families using the current system would benefit from these changes. According to the report, half of the families would be eligible for a CCS rate of 90% or more, and nearly 80% would qualify for rates above 75%. Attendance at early childhood education and care (ECEC) is projected to increase by 10%, primarily benefiting children from low- and middle-income families.
The proposed reforms would boost CCS costs by 37%, reaching approximately AUD 17.4 billion annually. The Commission envisions that all families with children up to five years old should have access to at least 30 hours, or three days, of early childhood education per week for 48 weeks each year.
Currently, nearly half of one-year-olds participate in some form of care, and about 90% of four-year-olds are enrolled in early education. Additionally, one in seven children aged five to 12 attends out-of-school-hours care. The Commission highlights that the expansion of early education has positively impacted workforce participation, with three out of four mothers with children under four engaged in paid employment in 2023.
Despite these advancements, the Commission notes that services are still scarce in some regions, and for some families, care remains unaffordable or inadequate. Children experiencing disadvantage and vulnerability are less likely to benefit from ECEC, according to the Commission.
The Commission urges a phased approach to reform and calls for a national agreement among federal, state, and territory governments to clarify their roles and responsibilities. Achieving universal access to early childhood education will require long-term commitment and investment, the report states. The Commission suggests expanding access by 2030, particularly for disadvantaged communities in remote, regional, and rural areas, with the goal of providing all children at least 30 hours of weekly care by 2036.
Education Minister Jason Clare welcomed the report, noting that recent government changes have already made early childhood education more affordable for over one million families. The government has also announced a 15% pay rise for child care workers and implemented fee caps. Clare acknowledged that the report highlights the need for further action to ensure children from low-income families, who stand to gain the most from high-quality early education, do not miss out.
Crossbencher Zoe Daniel praised the report but criticized its timeline as insufficiently ambitious. She proposed that all children should have access to a minimum of three days of ECEC at a low, set fee, such as AUD 10 per day. Daniel emphasized that this should be a legislated entitlement to prevent escalating out-of-pocket fees and ensure that more children and families benefit from quality ECEC. She argued that waiting until 2036 is too long.