Childcare changes entrench unfair market system

The Liberals’ changes to childcare will only entrench a market approach that is expensive and has failed to provide places where they are needed.

The current neo-liberal framework in childcare is a legacy of the Howard government, which deregulated childcare and targeted funding to individual consumers. This model, glorifying “consumer choice”, saw the government move away from funding service providers directly, as had been the case prior to 1997.

Childcare is almost universally acknowledged as crucial both for enabling parents, particularly mothers, to return to work, and for children’s socialisation and development. More than that, it is a basic social need and a fundamental right for women.

But rather than treating it as a public good and providing free and universal access, two-thirds of childcare providers are for profit, despite government providing most of the funding.

The main problem with a free market in childcare is that it is inefficient and drives up costs. As Macquarie University academics Ben Spies-Butcher and Adam Stebbing wrote in 2010, “Current policy gives parents more money to spend on childcare without sufficiently increasing the supply of childcare places. This tends to push up the price of childcare and reduce value for money.”

This is exactly what Scott Morrison’s new package will do. It will remove the cap of $7500 a year paid to families with incomes up to $185,000, and raise the cap to $10,000 for families earning over $185,000.

These subsidies will only boost childcare providers’ profits. While increased spending is needed, in the absence of greater supply of childcare places and tighter regulation of the industry more subsidies will only encourage providers to inflate prices, making childcare less affordable.

In addition, as researcher Eva Cox points out, “the policy fails to address non-fee-related reasons for gaps in the supply of services including few services for unprofitable age groups (the under-threes); fewer places in high-cost areas/locations; lack of flexible hours; and local centre waiting lists.”

Last year the parents of 57,000 children applied for childcare places only to be told they were not available, and there were inquires about spaces for a further 58,000 kids that were not formally applied for.

Roxanne Elliott from, which helps parents find childcare, explains, “Results from our annual Child Care and Workforce Participation Survey reveal that many families, especially those in NSW and Victoria, struggle to find high quality child care when and where they need it”.

The Productivity Commission report, which informs many of the new policies, is thoroughly imbued with market ideology, claiming that: “In most markets, parents have some capacity to choose between similar providers and there is competition.”

But according to Eva Cox, “this is a naïve market model, as the supply of childcare is often inadequate and mis-distributed. As a result, there is little serious ‘competition’ for parental choices. Desperate parents put babies on long waiting lists in the hope of finding places before their parental leave ends.”

Market failure

The risk of allowing the market free rein in such a vital sector as childcare was clearly illustrated when Australia’s biggest childcare provider, ABC Learning, collapsed in 2008.

ABC Learning was the biggest childcare provider at the time, accounting for 25 per cent of childcare places. But this market failure didn’t prompt the Rudd government to rethink and impose stricter regulations, even though government subsidies comprised 40 per cent of ABC Learning revenue.

Instead the Labor government let the market decide which centres would remain open and which workers would keep their jobs.

Public services like childcare should be government run, to ensure availability and quality of service. For a start, the government should simply build more childcare centres rather than relying on the market.

As Spies-Butcher and Stebbing explain, “Funding needs to be direct. If supply is the issue, then building centres and funding them is the solution; using mechanisms like rebates and subsidies is less direct and less efficient”.

For-profit childcare companies provide care on the cheap by minimising staff-child ratios and opposing requirements for higher qualifications for staff, contributing to the high staff turnover that plagues the sector. This will be made worse by measures like the nanny pilot which, unlike other childcare, isn’t required to adhere to the National Quality Framework that stipulates minimum qualifications.

When ABC Learning went bust unions demanded that the government take over the childcare centres and employ properly qualified staff for better quality learning.

Government provision could ensure qualified teachers and carers are paid fairly, which would make working in childcare more attractive and minimise disruptions to the important relationships children develop with carers.

By Lachlan Marshall


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