The latest news, views and reviews for Australia's child care industry. August 13, 2013
child care industry
Toby Hall - CEO - Mission Australia

Toby HallThis week we are delighted to offer you an opinion piece from the CEO of Mission Australia Toby Hall. Mission Australia is co-owner of Goodstart, Australia's largest child care provider.

Australia's child care system is a ticking time bomb.

Rising costs threaten not only the quality of our children's early childhood education but also the delicately balanced finances of thousands of families across the nation and the future productivity of our workforce.

Recently we have made great strides in terms of improving the quality of our child care system.

Our children need the best possible start to their early education. They deserve the best quality teachers and facilities.

But while quality has improved, the system is encountering a number of financial challenges that are putting its viability and families under enormous strain.

I believe the extent of this financial challenge is being grossly underestimated.

Ask any low-income family using child care in Australia about their recent experiences and while most will respond positively around the quality of care, they will likely complain bitterly about rising costs.

It's estimated that in the last year alone fee increases have translated to an additional $3.54 per day per child in out-of-pocket costs to parents.

For families who utilise child care for long hours and who already exceed the Childcare Rebate (CCR) cap, out-of-pocket costs have increased by an average of $7.08 per child per day. This is currently affecting more than 21,500 families who have reached the CCR cap.

Recently a Commonwealth Bank report found that customers put $152m of child care services on credit cards last year – that's 52 per cent more than the increase in general credit card spend over the past six years.

And things aren't about to get any better. In the same report the CBA predicts the child care credit splurge to grow by another 10 per cent this year.

In my hometown of Melbourne, child care costs are increasing seven times faster than inflation.

The simple fact is that costs are spiralling for providers and they're being passed on to families.

And it's likely many providers will need to lift their fees for the new financial year.

Widespread hikes in child care fees – on the eve of a federal election – means this will soon become a political issue.

Mission Australia, both as an operator of close to 50 early learning services under its own banner and as co-owner of Australia's largest child care provider, GoodStart, has long been a supporter of the Federal Government's National Quality Framework for Early Childhood Education.

Improving the ratio of carers to children guarantees more individualised attention. But for providers, reducing the number of available places for children to meet the new ratios also means a loss of revenue.

The framework also requires higher qualifications among carers. But more qualified carers mean higher salaries.

Let me describe how, in one part of Australia, the tension between quality and cost is playing out on the ground.

Mission Australia coordinates two large family day care operations in western Sydney – Penrith and Liverpool – where 200 educators care for around 1000 children in their homes each day.

While we provide management support and quality control, income remains with the educators. They are self-employed 'micro enterprises'.

Many of the families using the services come from low-income backgrounds. A large number of parents are studying or training with a view to returning to work.

Similarly, the educators are often from low-income families – many from non-English speaking backgrounds. They run their services on a low margin. The income they generate brings in crucial funds for their families.

But one of the unintended consequences of the quality reforms is that when the ratio of educator-to-child drops from 1-to-5 to 1-to-4 in 2014, our providers will lose 20 per cent of their income.

Many educators will raise their fees to cover costs. Others will throw in the towel and look for alternative employment. Many are already doing so.

Those that remain will be in the difficult position of having to tell parents of one child in their care that they no longer have a place next year.

Struggling families will of course be forced to pay more. Others will need to make alternative child care arrangements.

Quality is important but so are people's livelihoods.

The Federal Government puts around $4.1 billion a year into the nation's childcare system.

That needs to be recognised.

And its announcement of a $300 million fund to help offset the costs of hiring more qualified staff – despite its implementation being shrouded in confusion – is a step in the right direction.

But personally, I don't think government has a choice but to increase it's spending.

Without getting to grips with these challenges we're going to see a mass exodus from the workforce – mostly women – as families decide they can no longer afford to keep their children in care.

Not only will this hit the productivity of workplaces the nation over, it will also spell the end of early learning for thousands of pre-school aged children.

That's a terrible result when we know how crucial early childhood education is as a predictor of a child's success at school, their future employment prospects and their ability to become a contributing member of our community.

It's also the last thing we need when Australian fourth-graders rank behind their peers in every other English-speaking country in literacy and numeracy, with around a quarter not meeting the minimal acceptable standards of proficiency.

We're paying the price for the fact we haven't decided what we want from our early education and care system. Our lack of common agreement has meant we've ended up with a 'push me pull you' system that's trying to be all things for all people and struggles to do any of them successfully.

Is it about helping women to return to the workforce and increasing our productivity?

Is it about offering our kids a Rolls Royce early learning experience and preparing them for a successful transition to school?

Why do child care workers remain among the lowest paid in the country?

I add my voice, as the CEO of an organisation with an enormous interest in this issue, to the call for a Productivity Commission inquiry into the nation's early education and care system.

We need to ask ourselves some hard questions and take some tough decisions in the years ahead and we need the insight that a Productivity Commission inquiry will give us.

Because if we keep down the path we're on, willfully ignoring the steadily growing crisis around us, the consequences of our inaction is going to hit us like an express train and by then it will be too late.

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