The universal childcare promise

The journey towards universal childcare

Since becoming the leader of the federal Labor party, PM Anthony Albanese has repeatedly said that one of his major goals is a universal childcare system. And in the lead-up to last year’s federal election, he said that the policy would be a big part of his second-term agenda. We’re now nearly a year into that second term, so in this Squiz Shortcut, we’re taking a look at:

• What universal childcare actually is

• What’s happened so far

• And what might come next

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Squiz the Shortcut

Let’s start with the basics - what kind of childcare are we talking about?
The term the Albanese Government uses is Early Childhood Education and Care, but here we’re talking about kids aged up to 5yo. Childcare isn’t one size fits all - it can take a number of different forms. There’s centre-based care, which is the most common type, but there’s also things like in-home care for kids with more complex needs, or kids living in regional areas where there aren’t a lot of centres about…

Why is childcare so important?
Lots of reasons, but for parents, it allows them to work without worrying about caregiving at the same time. For kids, it gives them a head start on learning and social skills before they head off to primary school…

And it scales up by age, right?
Exactly… Particularly in the larger centres, there are nurseries for babies under 18 months, a different section for toddlers (kids up to 3yo), and then another section again for preschoolers getting ready to start kindergarten…

So that’s childcare - what’s universal childcare?
Essentially, it’s the concept that regardless of a parent's economic status or location, they have the option to access childcare for their kids. Similar to the theory that every kid in Australia has the right to go to school, universal childcare would extend that right out to younger ages. 

Would it be free for parents to access?
Not entirely… The idea is that the system would change from a quite complex one as it is at the moment - and one that can be tricky for parents to work out - to a flat daily fee in the ballpark of $10 or $20. Which, as parents with younger kids would know, is a lot less than it is at the moment…  

What does it currently cost parents?
According to the organisation Care for Kids, the average price is $134.99 a day before subsidies kick in. But that price gets a lot higher if you live in a big city. For example, it’s $179.34 a day in Sydney but less if you live in a regional area. The website Finder.com.au puts it at around 15% of an average parent’s income. But while it might be cheaper in regional areas, that doesn’t mean that it’s easy to access. 

Just explain that a bit more…
Lots of childcare centres are for-profit, so they operate where the most money is, which means there tends to be more of them in cities, where there are more people. Having quality childcare centres in regional areas is another important element of universality, so it’s not just about how much it costs… To the average parent, this all sounds pretty good, but for taxpayers as a whole, it’s going to prove expensive. 

How much is it likely to cost taxpayers?
The Productivity Commission did a big report on this in September 2024, and it found that making the current childcare system universal (although it recommended a different model to that flat-fee idea) would cost at least $8 billion more in taxpayer money than it does now. The Grattan Institute looked at this too - it found that it would cost the budget even more than that - around $10 to $12 billion a year…

Why does the PM think it’s a good idea?
While it’s expensive, according to the PM, it’s not money down the drain. He says it’s an investment and those billions stand to contribute to Australia’s economic development. 

How does that work?
The argument is that it would boost economic participation. If there’s no hit to the hip pocket for working parents - and particularly mothers - they can work their jobs without worrying about the money they have to spend on childcare, so they can participate more fully in the economy. That boosts Australia’s productivity, which is something the government has been looking to do… 

Is there some evidence to back that up?
Yep… It’s backed by analysis from the Grattan Institute and PriceWaterhouseCoopers - both say universal childcare would boost Australia’s economy. The Grattan Institute put the figure at $27 billion, while PwC said that every $1 spent on universal childcare and early education would be repaid over a child’s life due to the many benefits. Although not everyone shares that view…

What do critics say about it?
Based on the numbers they’ve crunched, the Coalition is warning of the impact of betting on the future benefits of the scheme at a cost to the bottom line in the here and now. And if you compare it to the NDIS, for example, there are those warning of a similar experience - where the good done by the system comes with a huge, ballooning cost. 

What else has been flagged?
There are also some concerns that a government system could be exploited by private operators - as in, would the economic subsidies provided by the government just be absorbed by private childcare operators…  

How many private childcare operators are there at the moment? 
Way more than there are in the primary school system, that’s for sure. Roughly 60-70% of primary schools in Australia are government-run, whereas in childcare, about 5-10% of centres are government-run, another 15-20% are non-profit, and the rest are private, for-profit centres which are run as businesses.

Got it… So, what’s happened so far?
There was a fair bit happening in the world of childcare at the start of this year. On 5 January, the Albanese Government kicked off something called the 3-day guarantee. It made a range of changes to how childcare is accessed in Australia…

What sort of changes?
Before these changes, your childcare subsidy was tied to something called an activity test. Essentially, the amount of subsidised (paid-for) childcare hours you received depended on how much you worked or volunteered. But that system disadvantaged parents who had casual work or irregular hours, and it meant you were in a spot of bother if you lost your job. 

What happens now?
All eligible families have at least 72 hours a fortnight - 3 days a week - of subsidised childcare. The amount can be higher for First Nations families, who now receive up to 100 hours of subsidised childcare per fortnight, regardless of their employment status. The government has also begun something called the $1 billion building early education fund.

Tell me about that…
This is about fixing that regional shortage we talked about earlier - the lack of childcare and early learning centres in remote areas. So, that money is going towards building a couple of thousand new early learning/childcare centres in regional areas, as well as the outer suburbs of cities, to try to even out those numbers. And lots of those will be built in the same location as existing public schools so parents don’t need to do multiple drop-offs.

Is anything being done to attract more educators into the sector?
Yep… The government has also funded a 15% pay rise for educators in early childhood - but there are rules around it. Any centre that takes it isn’t allowed to raise their fees by more than 4.4% over the following year. It’s also asked the ACCC to ensure that centres don’t pass any costs through to parents…

How’s it been going so far?
There have been some hiccups. For example, many in the childcare industry say that the system wasn’t ready for the influx of new parents. And some families are stuck on a waitlist - they have access to the subsidy, but not a childcare centre where they can access it. There’s also a shortage of workers in the sector to service those centres.

So, there’s still a long way to go?
Yep… One of the big issues is who owns the centres that exist at the moment. As we said, most of them are private… And there have also been big concerns around their safety, with revelations last year that alleged sexual predators have been working at several centres in Victoria, and a range of other safety issues brought up since… 

How would they approach that?
One of the options the government is looking at is investing in more new childcare centres it would own, or potentially leasing out existing ones and making them government-run.

So, how far away is full universal childcare then?
The Productivity Commission report from 2024 said that the system should be fully in place by 2036…

That’s a decade away…
Uh-huh… But it’s a long journey with some big challenges ahead. Issues around supply, staffing, safety and more remain roadblocks for the Albanese Government to overcome, but the PM has made it his key issue, so expect to see more movement in the coming year…

Onto our Recommendations

Reading: You’re in for a meaty read, but if you’re keen to get into the detail, here’s the Productivity Commission’s report into Universal Childcare… 

Watching: And here’s a critical take on the government’s plans from childhood industry expert Jen Fleming…

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