Many Australians are rightly shocked by the spate of recent reports of serious safety breaches in early childhood education and care (ECEC) settings. There have been various responses and ‘fixes’, but few have examined the fundamentals of the sector to ask why it may be more vulnerable to serious failures than we might expect.
Australia’s ECEC system is very different to other parts of our broader education system. The sector has been shaped by the sophisticated approaches designed to match the demand and supply for childcare in the most cost-effective way possible.
In this interactive, we explain how some of the fundamental policy principles and settings underpinning Australia’s ECEC system can contribute to a sector with high turnover of staff and providers.
In the drive to increase access for more families – and keep costs down – Australia has chosen to take a fundamentally market-based approach to provision. By definition, this means encouraging a system that is dynamic – responsive to demand, with relatively low barriers to entry. At its core, it is a system that rewards those who can produce the service (an hour of early learning) in the most ‘efficient’ way possible.
While this approach has many economic benefits, and with appropriate regulation can work well, it is important to understand the incentives inherent in the system it creates, and what that means for children, families and those working in the sector.
Australia’s ECEC system looked very different 30 years ago. Fewer families used formal care, and there was much less available.
A lack of access to early learning disproportionately impacted women, especially those who wanted to return to the workforce. Governments at the federal level looked to different models to increase supply.
But unlike schools, governments are much less involved in the operation of childcare centres. Early childhood education and care is also primarily a state and territory government responsibility. To achieve its policy aims, federal governments focused on using funding mechanisms.
To encourage an increase in places, the Australian Government began offering a series of payments and subsidies, like the Child Care Benefit in 2000.
This figure helps show the impact of government changes. It shows the relative growth of long day care places and the population of children in Australia aged 0 to 4 years with the base year of 2000 (2000 = 100).
The subsidies and system settings have resulted in a large increase in places relative to the number of non-school aged children.
The type of system that Australia uses for services covered by the Child Care Subsidy is known as a demand-side subsidy model.
Government subsidises families’ demand for childcare with a means-tested subsidy that is paid directly to the childcare provider and passed on as a fee reduction.
The subsidy has the effect of increasing demand, which providers respond to by creating supply in the form of more places.
Governments retain overall responsibility for the system by making sure providers meet minimum requirements, such as child to educator ratios.
The demand-side subsidy model is different to our school system, which has a supply-side approach – it focuses on direct payments to schools. In addition, unlike schools, early learning centres can be for-.
This approach has been enormously successful in increasing the supply and use of childcare.
But this growth has not been even. It has been private for-profits that have come to dominate. Since the national register was established in 2013, almost all the growth in long day care places has come from for-profit providers.
These for-profit providers are diverse and range from single operators to large corporate organisations.
One common principle of market-based approaches like those used in childcare is that providers should be able to enter and leave markets relatively easily. Lower barriers to entry encourage providers to start services or expand existing ones. This helps supply grow in response to subsidised demand from families.
Lower barriers to exit reduce the risk of being left with large sunk costs, which are costs that cannot be recovered if a provider closes or leaves the market.
The result of this model is considerable change in provider ownership and management.
It is possible to show this by using changes in approved provider details for each service on the national register, which commenced in 2013.
The approved provider details identify the entity with regulatory responsibility for operating the service. We use this is as a measure of churn in approved providers.
This map shows all the long day care centres in Melbourne in 2013.
Let’s zoom to to the area of Monash in Melbourne’s south-east to take a closer look at the change since 2013.
In this area of Melbourne’s south-east, the number of long day care centres grew by over 50%, from 37 in 2013 to 57 by the end of 2025.
The opening of new centres is only one part of the story. Many services have changed providers.
The centres with a red circle around them have changed approved provider at least once since 2013.
Some services have had many changes in approved providers.
This service has changed approved provider six times since 2013.
Of the services that were operating at the end of 2025, about 32% had changed approved provider at least once since 2013.
For-profit centres are much more likely to have changed approved provider. Since 2013, 40% of for-profit long day care centres have changed approved provider. This compares to about 11% of not-for-profits.
Some of this change is minor and may reflect internal legal restructures. However, many provider changes are likely to reflect substantive transfers of service approval to a different operator.
This level of change can be seen as consistent with the policy architecture of a managed market model designed to remove barriers to entry and exit, and to create the conditions for “efficient innovation in service delivery“.
Australia has used a series of sophisticated approaches to increase the supply of childcare while keeping costs down.
These approaches are similar to models used in designing markets in the retail sector or in aviation.
You can see the impact of this in wages, which are much more like those in the retail sector than other parts of the education system.
This figure shows the median hourly wage of occupations in Australia.
It shows that medical practitioners ($95.40) have the highest median hourly wage.
Early childhood educators and child carers have some of the lowest wages.
This is only slightly more than hospitality workers and less than call or contact centre workers.
And school teachers earn much more per hour than early childhood educators.
Why is this so?
Australia’s childcare system relies on the ‘efficient’ production of early learning services to ensure that costs to taxpayers remain low.
The per-hour subsidy rate for the CCS uses the average market hourly rate (plus some loadings) from when it was introduced in 2018. This maximum hourly subsidy rate is indexed to inflation. Providers can charge above the subsidy cap, but families must pay the difference out of pocket.
Using market averages to set funding rates is known as a ‘benchmark price’. Because the cap was derived from observed market fees, it carries forward the pricing structure already embedded in the market.
So rather than calculating how much it might cost to deliver a high-quality service, the subsidy rate effectively locks in a per-hour rate based on what has happened before.
This means that the subsidy rate can support a minimum service but bakes in the deficiencies that have existed in the early learning sector.
As staffing is one of the highest costs and restraints to growth, it is important to have a supply of workers. From an economic perspective, rapid movement and entry of staff into an industry can be viewed as a positive. This is because there is a greater pool of available workers and with a greater supply of workers there is less pressure to increase wages.
However, the impact of this approach can be seen in the high rates of staff turnover in ECEC.
There is far greater turnover of employment in ECEC compared to other parts of the education system, and many other industries.
This chart shows the percentage of jobs that were held for less than a year by industry using tax returns from 2022-23.
Industries like defence and the police services have the lowest levels of jobs that were held for less than a year. This suggests a more stable workforce and longer-term engagement with employers.
The motion picture and video production industry has the highest level of jobs held for less than a year. This suggests an industry with more shorter-term contracts.
More than half the jobs in child care services were for less than a year.
This is twice the level of jobs in primary and secondary schools, which have some of the lowest rates of jobs whose duration was less than a year. This suggest that those working schools have much more stable and longer-term employment arrangements than those employed in child care services.
Recent changes to the public register mean the Australian Government now publishes data on enforcement actions recorded against large providers over the past two years.
Large providers are those that operate, or intend to operate, 25 or more services.
Enforcement actions are taken by the state or territory regulatory authorities when a service is found to be not complying with National Health and Safety regulations. They range in severity and are designed to improve and ensure children’s safety and wellbeing.
We examined the likelihood of these large providers having an enforcement action listed for centre-based services (excluding outside of school hours care) operated by large providers.
About 30% of centre-based services are operated by large providers.
For-profit providers make up half of the services operated by large providers.
Of the services operated by large for-profit providers, about 23% have an enforcement action listed.
In our analysis, large for-profit providers are over three times more likely to have an enforcement action recorded than services operate by all other large providers, including large not-for-profit providers.
It is important to note that poor quality providers and compliance issues are not defined by provider management type. There are many not-for-profit and community-managed centres that have low quality ratings and where regulators have noted serious compliance issues.
But for-profit providers are more likely to have enforcement actions recorded than other provider management types.
This is the same provider management type that has grown the most under the current system settings, which suggests a link between the system design and incentives used to grow provision, and increased risk as measured through enforcement actions.
Our analysis suggests that Australia gets a lot of early childhood education and care for a very ‘efficient’ price. But this can come at a great cost.
In ECEC the product is not just a ‘place’ in a service, it is care and education for young children. These children need safe, predictable environments and can be incredibly vulnerable when things don’t go as planned.
Educators need stable workplaces, and the ability to build connections with children, families and the community.
Conversely, our ECEC system works by rewarding providers that can produce an hour of care efficiently. When the system design prioritises low barriers to entry and exit and rewards low-cost delivery, it can also create the conditions for churn – in providers and staff. That churn can increase risk.
And because the CCS subsidy is based on what the market has charged before, rather than the full cost of quality care, it supports a minimum service.
This situation cements in existing deficiencies, including low wages and a workforce that is already in a state of relative impermanence.
With these settings embedded into the system at its very core, it is difficult for the ECEC sector to break free.
At the very least, it creates barriers to educators focusing on the developmental needs of the child, and at worst, it creates environments that may put children at risk.
To fix the problem, a new approach will be needed.
