Childcare reforms an early Christmas present to parents and children

The new package invests in expanding childcare places and lifts the parental “activity test” that prevents some children from getting early childhood education and care.

The absence of universal early childhood education and care has been Australia’s blind spot for too long. As the evidence mounted on the importance of the years before formal schooling for educational and social development, we have retained a system that has excluded tens of thousands of disadvantaged children.

In 2020, then-opposition leader Anthony Albanese promised to work towards universal childcare. This new package represents a sensible first step towards that goal.

The headline reform is a “three-day guarantee”: from January 2026, every family with young children will be eligible for three days of subsidised early childhood education and care per week.

This is why the Productivity Commission, the ACCC, and other economists have all argued for removal of the activity test.

At last, the unfair and counterproductive “activity test” for access to subsidised early childhood education and care will be curtailed, and will only apply to the fourth and fifth days.

Making a child’s access to early education contingent on whether their parents proved to Centrelink that they were working or studying or volunteering, was always dubious on principle. Would we accept this as a reason to deny a child schooling or community services?

The intuition – rather than evidence – supporting the activity test was that withholding access to early childhood education and care would encourage parents to seek work or study. In practice, the evidence suggests that stricter activity testing hasn’t done that.

The activity test means low-income households are more likely to have to pay for unsubsidised care, and their children are the least likely to be enrolled. The risk of being caught in a situation where working hours dip below the threshold and the subsidy is withdrawn (creating a debt to Centrelink) weighs on low-income parents who work irregular hours. And the inability to secure affordable care for your children is itself a barrier to parents being able to study or return to work.

The people held back are overwhelmingly women, particularly from those communities where social norms already make it harder for them to work outside the home after having children.

The main impact of the activity test is that children from disadvantaged backgrounds are more likely to miss out on early childhood education and care – the very children who stand to gain the most from the educational, employment, and health benefits that high-quality early education and care bring.

This is why the Productivity Commission, the ACCC, and other economists have all argued for the removal of the activity test.

But we do have to think about the supply side of our early childhood education and care blind spot. Ensuring adequate wages for early childhood educators has been an important piece of the puzzle, to address workforce shortages driven by low pay and a lack of career pathways.

Still, in Australia, we do not publicly provide, commission, or system-manage early education to match population needs. Some 700,000 Australians have effectively no access to early education centres at all. Contrary to the suggestions of Simon Birmingham, these aren’t areas where parents typically forego paid work to play golf or do pilates.

So, Labor’s $1 billion commitment to expanding the number of childcare centres and places is welcome.

The investment will be focused in areas where early childhood education and care places are in the shortest supply – particularly in outer suburban and regional areas. Where possible, new facilities will be on school sites, which should help keep costs down and make life easier for parents with children of different ages.

This package won’t fix all the problems in the system. Families still need to grapple with the activity test to access subsidies for the fourth and fifth days of care. And the investment in expanding the number of centres isn’t large enough to meet the needs of the population.

But the government appears to be walking the line between fiscal restraint and spending enough to make a difference. Importantly, it is leaving the door open to more substantial reform down the track such as the design of the subsidy system and the shape of the market.

Childcare is unaffordable for too many Australian parents. But childcare policy failure is unaffordable for all of us. For the government to seek to save pennies by withholding access to early education for the children who will benefit from it the most is not just Scrooge-like behaviour, it’s a false economy.