How the early childhood learning and care system works (and doesn't work) – it will take some fixing

Recent Victorian and New South Wales government announcements may signal the first steps in a profound change to Australia’s early childhood sector.

And it’s been a long time coming. Over the past 30 years there has been a big increase in the use of early learning. There are more parents in the workforce and more children in formal care than ever before.

And our current system is struggling to cope. Access to childcare can depend on where you live.

Low pay and poor conditions have led to major problems with attracting and retaining the skilled workforce we need to deliver early learning and care services.

The state governments’ promises are significant. They follow the new federal Labor government’s promise to investigate how to introduce universal high-quality childcare.

But a lot of work needs to be done for Australia’s early childhood sector to live up to the promises being made by governments.

Read more: A $15 billion promise of universal access to preschool: is this the game-changer for Aussie kids?

How does the current system work?

Australia’s early childhood sector is better thought of as several systems operating under a single national quality framework.

Services funded by the Child Care Subsidy (CCS) are the largest part of the system. These include what is traditionally thought of as “childcare”.

Read more: High childcare fees, low pay for staff and a lack of places pose a huge policy challenge

These services use a subsidy-based funding model where providers set their price and charge parents a fee.

The federal government supports the cost through a subsidy, based on family income and paid directly to the childcare service.

A major part of the NSW and Victorian government announcements is an expansion of preschool programs.

Whereas childcare can cater for children aged 0 to 5 years, preschool is more focused on the year or two years before school. Preschool involves structured play-based learning in a range of settings. These include schools, standalone centres and, increasingly, alongside childcare services in centre-based day care.

By expanding access to preschools, the state governments are offering to create more places, particularly for children aged 3 to 5.

Like the school sector, they will use a direct funding model. This is where governments pay a pre-determined amount directly to a centre based on enrolments.

The NSW and Victorian government also announced measures focusing on the supply-side of childcare.

The Victorian government is promising to establish 50 government-operated childcare centres, bucking a trend of relying on non-government providers to deliver childcare.

NSW will create a fund to support an increase of 47,000 childcare places at non-government providers.

Read more: More diversity can help solve twin problems of early childhood staff shortages and families missing out

What are the problems with the system?

The current early childhood system has strengths, but many weaknesses too.

The total amount of subsidies provided is large – about A$8.5 billion per year. But so is the cost to parents. Estimates based on federal government data suggest the current average out-of-pocket cost for the first child in centre-based day care is A$5,000 per year.

Access is another big issue. Recent Mitchell Institute research highlights the extent of the problem of “childcare deserts”. These are areas where there are more than three children vying for every available place.

About 35% of Australians live in a childcare desert. And 1.1 million Australians do not have access to a childcare centre at all.

Read more: More than 1 million Australians have no access to childcare in their area

Unlike the school system, governments do not have an obligation to provide access to childcare. Instead, providers choose where to operate. Price plays a central role in the system’s design, and weak or unstable demand means it can be too risky to operate in certain locations.

Providers can be encouraged to go where there is more demand and where they can charge more.

Finding the workforce to enable increased supply will be a further challenge to the proposed expansion. The sector is experiencing record workforce shortages.

A high-quality workforce is a major component of a quality system. Attracting skilled workers and retaining them will be very important.

Read more: 'Greatest transformation of early education in a generation'? Well, that depends on qualified, supported and thriving staff

What’s driving the need for change?

Behind the flurry of announcements are long-term demographic shifts. The proportion of children in formal childcare has increased by 75% since 1996. About 66% of three-year-olds were in a subsidised service in the July 2021 quarter. Nearly 90% of eligible children were enrolled in a preschool program in the year before they started school.

If home is where we start from, some form of early learning is where most children will end up next.

Making sure that families are supported in a way that meets their needs and matches a child’s stage of development is vitally important.

The early childhood sector is only part of the response. Meeting the needs of families and children also requires reform of parental leave, maternal and child health services, and other wraparound services.

The announcements made by the federal, NSW and Victorian governments set the scene for the next stage of reform in the early childhood sector.

Designing a system that delivers affordable, accessible, high-quality early childhood education and care will require a lot more work, and a lot more resources than what has just been announced.

This article is part of The Conversation’s Breaking the Cycle series, which is supported by a philanthropic grant from the Paul Ramsay Foundation.