New report: Addressing market imbalances to achieve quality and affordable ECEC

The Front Project commissioned Mandala to explore the impact of policy settings on Long Day Care (LDC) market composition over the past 10 years.

Paving the Path: Addressing Market Imbalances to Achieve Quality and Affordable Childcare reveals key insights into the types of providers that are in the LDC market, where they are most likely to establish new services and where quality is most likely to be found.

Supply

Paving the Path reveals that over the past decade demand for ECEC services in Australia has increased. This has been primarily driven by population growth, particularly in the under-7 age group, and a surge in female workforce participation. Mirroring this is the rise of LDC services. 

LDC places have increased by 69% since 2013 (from 401,000 to 675,000). However, the report shows that growth is unequal and is dominated by for-profit providers. In 2024:

  • 70% of LDC services are run by for-profit providers. This is an increase from 60% in 2013. 
  • 23% of LDC services are run by not-for-profit providers. This is a decline from 32% in 2013.

This trend is most stark in ‘gentrified’ LGAs where not-for-profit LDC places declined by 10% between 2021-2024, while for-profits grew by 25%.

Distribution 

While some areas, especially in urban centres, are well-serviced, other regions face stark disparities. 

In low SES areas there are 41% less LDC places per 100 children than in high SES areas. For-profits tend to concentrate in gentrified areas and mid-major cities where there is a greater profitability and families generally able to pay more. This means existing inequities between low and high SES areas and people in cities and regional and remote areas continue to be exacerbated by reduced access to ECEC.

Quality

Paving the Path draws on recent findings of the Australian Competition Consumer Commission, Jobs and Skills Australia and the Productivity Commission to spell out the implications of these trends.  On average, NFPs offer higher quality services that for-profits, based on National Quality Standard ratings. 28% of NFPs are either ‘exceeding’ the NQS or rated ‘excellent,’ compared to 15% of for-profits. In addition, there are disparities between staff wages and how much they charge families.

  • 95% of staff working for large NFPs are paid above the award rate wage, compared to 64% of staff in large for-profits. This discrepancy is consistent in small to medium-sized NFP services.  
  • Large NFPs have a 28 percentage point lower rate of exceeding the hourly rate cap over large for-profits. This means families who send their child to a large NFP provider are much more likely to pay less than families who child attends a service at a large for-profit provider. 

Why does this matter? 

Growth in the supply of childcare places over the last decade has been instrumental to more children accessing the lifelong benefits of quality ECEC. However, access currently depends on where a child lives and the fees families can afford to pay.  

Paving the Path demonstrates that for-profit providers dominate the LDC market, primarily benefitting middle/upper-income families and those in urban centres. 

As policymakers forge a path towards universal ECEC, they must consider what outcomes they want from universal ECEC and actively steward the market towards achieving them. If we want to see affordable, accessible and inclusive ECEC, policymakers must consider:

  • Who is being incentivised to expand or establish new services in communities that have unmet need?
  • How can quality services be incentivised to expand?
  • How can the LDC market reflect more balance between provider-type?
  • How can significant investment be leveraged by government to ensure quality outcomes are delivered by providers?

The path forward for Australia’s ECEC sector requires collaboration between government, policymakers, families and service providers. Insights from Paving the Path underscore the need for system stewardship, where government plays a leading role in shaping the sector to meet desired outcomes—specifically, high-quality, accessible and affordable education and care for all children in Australia.