The childcare subsidy gives parents 'choice', but the government must ensure good choices are available

Australia Broadcast Center

02-07-2025

This week's horrifying allegations against a Melbourne childcare worker have provoked shock, grief and reckoning.
For those who spend their lives thinking about how to improve the systems and policies our society relies on, moments like this can also provoke change.
We expect our governments to be improving our institutions all the time, not just when there is a horror story — and they often do, in ways that do not make headlines — but policy advocates understand the power of a "burning platform" to make reforms stick.
This week, childcare advocate Georgie Dent of The Parenthood said leaders needed to go beyond steps already underway to improve screening and surveillance of staff and redesign the sector entirely.
Dent's two priorities are an independent national regulator with the power to effectively force the closure of centres that do not meet minimum standards, and a new funding model where child care is provided directly like public schools, rather than subsidised.
It is obvious how a national regulator relates to the failures exposed by this week's allegations — in fact, it may surprise many to learn that shutting down substandard childcare centres isn't already standard practice, and the federal government has work underway to change that.
The relevance of funding may not be so obvious. But the financial model of Australian child care — where the federal government gives money to parents rather than operating centres itself — has long put it at arm's length from ensuring quality and safety.
That is a challenge for the Albanese government, which has long aspired to make those subsidies universal but has limited oversight of what exactly it is subsidising.
Our childcare system is built with "choice" at its centre. Rather than the government providing childcare services directly, it pays a subsidy to eligible parents, who choose from a range of providers, including for-profit and not-for-profit organisations.
The logic is that high-quality services will naturally follow if parents are "empowered" to give their money to a good provider instead of a bad one.
It's a hybrid system: demand is public, with the government paying for at least a portion of the cost of care, but supply is private, with providers competing with one another in a market for customers, and regulations often light-touch.
Similar systems are today used for a range of services that were once directly provided by government, including aged care and vocational education, and for disability care through the NDIS.
In-home aged care recipients have "packages", NDIS participants have "budgets" and trainees have "fee-free TAFE", all different names for subsidies allowing them to choose their preferred providers.
But this choice "revolution", which has taken place in the last few decades, has its critics. Mark Considine, a politics professor at the University of Melbourne, calls it evidence of a "careless state".
Though motivated by a desire to improve on often stale government service providers, Considine argues it became an excuse for governments to outsource quality assurance to those who use the services, who may lack the information to make informed choices.
Sometimes there may not be much choice at all, like in Australia's childcare "deserts" where only a smattering of providers are available.
But even where options are plenty, it is an open question whether those who rely on these services, who are often vulnerable and confronting complicated systems, are really equipped to sort good from bad.
That is why Dent advocates the school model — schools being one of a few remaining services directly provided by (state and territory) governments, with hospitals another.
"The way schools are funded is directly. Parents are not subsidised to send their children to schools," she said on Wednesday.
"There is no accountability for the childcare subsidy … where taxpayers and the [federal] government are able to say that receiving this money is dependent on you meeting these minimum standards …
"When we've got services that have almost got a business model around employing the fewest number of staff with the lowest number of qualifications, that creates extraordinary risk."
The federal government has not indicated it intends to abolish the subsidy system, but it is considering how to improve regulatory oversight, with Education Minister Jason Clare vowing to deny subsidies to substandard providers in forthcoming legislation, something in train before the events of this week.
The government is also considering how to improve training, pay and retention in the childcare workforce, and address childcare deserts.
That trio of reforms was suggested by the Productivity Commission, which recommended retaining the subsidy system but also called for a national commission to better regulate quality, similar to Dent's other recommendation.
It would be a similar approach to what has unfolded over the last few years in aged care, another sector where stories of neglect and abuse kickstarted a process of change.
An Aged Care Quality and Safety Commission was set up in 2019 and has been accompanied by a star rating system to inform choices.
A new "rights-based" framework for the system was also legislated last year but recently had its implementation delayed.
The jury is out on these changes, and the ABC reported last year that five-star ratings were being handed out to aged care homes found not to be compliant with government standards.
Direct provision of government services is no perfect guarantee of quality either, as we often see with schools and hospitals.
But there is growing recognition, including from the government itself, that giving people "choice" in the services they access cannot come at the expense of strong oversight to give parents the confidence, no doubt shaken this week, that those choices are safe.
If the government does press ahead with universal child care, which will require more providers and more workers, safeguarding quality will be essential.