Yet quality, affordable care remains inaccessible for many families. Since the last increase in government subsidies a year ago, fees have increased faster than inflation and wages.

But what if the government offered early childhood education in the same way it offered school education? Reforming Australia’s approach to early childhood education would increase the size of the economy by $168 billion and allow the government to collect an additional $48 billion in revenue.

Both sides of politics know the benefits of early childhood education: high-quality childcare improves educational outcomes for children, and low-cost or free high-quality childcare also increases labour force participation by providing parents the opportunity to return to work. Access to affordable and quality care is also integral to family violence prevention and response.

Despite the clear value for children, families and the broader community, early childhood education in Australia is often run by private, for-profit providers that drive up fees and have contributed to the creation of childcare deserts across the country. Early childhood education centres are also difficult to staff sustainably, with many workers underpaid and undervalued.

But the solutions being offered mainly focus on increasing childcare subsidies in the hope of reducing the cost for families even though this doesn’t work.

The most recent inflation numbers show that increased subsidies are eroded by higher fees. When the childcare subsidy was increased a year ago, parents saw a significant benefit by way of cheaper fees. But in the year since then, the cost of childcare for Australian families increased 12.1% – a rate that far outstrips the 2.8% increase of general inflation. For families with a child in full-time centre based care this is an extra $1,270 per year.

We shouldn’t be surprised that profit maximizing businesses would see more government subsidies as a great opportunity to hike fees: early childhood education and care is big business, and the industry is dominated by for-profit providers. The sector’s largest for-profit provider made $56 million in profit and paid its CEO $3 million last year, and is expected to earn over a billion dollars in revenue over the next 12 months.

And higher prices don’t translate to better care: The Australian Government’s National Quality Framework shows that for-profit providers on average do worse than not-for-profit and state-owned providers when it comes to metrics like educational practice, children’s health and safety and staffing arrangements.

Government subsidies for childcare don’t address the serious need for reform of the sector either. Despite massive profits, the childcare sector is facing serious challenges – particularly staff recruitment and retention – which reduce the number of places offered by providers. Much of this is because early childhood educators earn so little – less than retail workers or data entry workers. Anglicare’s recent Rental Affordability Snapshot showed that early childhood educators could afford less than 1% of available rental properties across Australia in March 2024.

The Federal Government has just announced a 15% pay rise to childcare workers over the next two years and flagged more pay rises to come. This will help in an industry that is underpaid. But workers are also concerned about the lack of career progression as a barrier to staying in the sector.

In many places, there are simply no childcare centers available. One third of Australia’s population live in neighborhoods dubbed “childcare deserts”, in which regional, rural and low-income areas are overrepresented. With the industry dominated by for-profit providers, it is sadly not surprising that high socioeconomic areas are better serviced by childcare operators.

But these problems can be solved. We already have a ready-made solution: the larger challenges that early childhood education faces could be solved by treating the industry in the same way we treat public schools.

First, where practical, the Federal Government could fund the building of state government-run early childhood education centers in, or near, every primary school. If parents choose to, they could send their kids to the local center in the same way they can send their kids to the local primary school. The outpouring of new supply would help flood the childcare deserts.

Secondly, employing early childhood educators as public servants would mean governments have a greater stake in ensuring that these essential workers are valued and properly compensated.

Finally, the sector needs to undergo a radical shift from for-profit providers to a not-for-profit or state-run model. When it comes to school education, we understand that subsidising for-profit providers is not consistent with the best outcomes for children. For profit schools don’t qualify for government subsidies. Private schools are mostly not-for-profit. They use school fees and government subsidies to properly pay the workforce and provide education to students.

Reforming the sector would be expensive but have enormous economic benefits. Australia Institute research shows high quality, affordable, and available early childhood education and care would increase the size of the Australian economy by $168 billion and allow the Government to collect an additional $48 billion in revenue. These benefits largely come from parents being able to return to or remain in the workforce.

To solve the challenges the early childhood education and care industry faces, we shouldn’t just throw bigger subsidies at profit maximizing businesses. We don’t need to reinvent the wheel. We just need to look at how we already educate school children, and adapt what we know already works.