The early years: four small charts that tell a big story

February 2021

Key Points

  1. Australia’s investment in the early years is low by international standard
  2. Childcare costs keep going up, year after year
  3. Some states are leading the way on investing in preschool, yet there is no consistent investment across Australia
  4. There is no Commonwealth commitment to preschool beyond 2021

All of us who spend time with young children know just how much they learn, and how quickly. The early years are a time of rapid brain development. A child’s brain reaches 90 per cent of an adult’s by the age of five. A rich, learning environment in the early years can help children thrive.

Childcare is also incredibly important to better enable workforce participation by parents, especially women. Australia’s continued economic prosperity will be underpinned by increasing the participation of parents in the workforce, and the cost of childcare is a significant barrier to this. The economic case for improved access to childcare was made by the McKell Institute in our recent report Why reform of the Child Care Subsidy would strengthen Australia’s economy.

The McKell Institute is proud to be supporting Thrive By Five, an initiative of the Minderoo Foundation that is campaigning to make Australia’s early years childcare system high quality and universally accessible.

Here are four charts that tell the story of early years in Australia, and why change is needed.

Childcare costs keep going up

Childcare costs keep rising for families, year after year. Over the last fifteen years there have been several major attempts to reduce costs for families, costing billions of dollars each time. The introduction of the Child Care Rebate in 2007, its increase to 50% in 2008, and the introduction of the Child Care Subsidy all saw a temporary reduction in out of pocket childcare costs for families. However soon after those billions of dollars were invested, costs began increasing again. 

Making childcare free during the COVID-19 pandemic in the middle of 2020 had an immediate and significant effect on childcare affordability. However once it was withdrawn, fees snapped back to prior levels and it can be expected that their upward climb will continue.  

There are structural factors in the nature of the childcare industry unpinning the inexorable rise in childcare costs, and the CPI chart shows the limited utility of price subsidies to fix this problem in the long term without further, more fundamental reform.  

Australia’s investment in the early years is low by international standard

Despite regarding ourselves as world leaders in many areas – such as health care, or our school education system – Australia is a middling nation when it comes to our investment in the early years.

The second chart here shows that Australia ranks in the middle of selected OECD countries where comparative data is available, in terms of public spending on the early years, measured as a percentage of gross domestic product. 

Interestingly, this analysis shows that most of our spending (unlike many other countries) is targeted at childcare affordability, rather than ‘pre-primary’ or early education and learning such as preschool or kindergarten programs for three and four year olds.

Some states are leading the way on investing in preschool

All Australian children should be able to access high quality early learning in the years before school. The benefits of high quality early learning are well documented in science and research literature, and the 2015 McKell Institute report Baby Steps or Giant Strides? presents a compelling case as to why greater investment in pre-primary learning for Australia’s children will have significant benefits to both those children and our community overall. 

Investment in preschool or kindergarten early education is not consistent across Australia, with some jurisdictions making significantly more progress than others. 

Victoria, for example, is the state where there is the highest level of recurrent expenditure on early childhood education, as measured by the Productivity Commission. Victoria is also leading the way when it comes to expanding early learning by rolling out 3 year old preschool. This additional investment is likely in coming years to further increase the gap on total recurrent spending on ECEC that Victoria has over other states. Other states, who have smaller populations, also perform well on their levels of investment relative to population. South Australia and Western Australia also stand out as jurisdictions that have higher rates of expenditure relative to their population. Western Australia spends more on ECEC than Queensland, despite having a smaller population of 3 to 5 year olds. 

Addressing the disparity of access to early learning across the country was a driver of the National Partnership Agreement on Universal Access to Early Childhood Education introduced by the Rudd Government in 2008 which provide new Commonwealth funding and sought to give all Australian 4 year olds access to 600 hours (15 hours a week) of early education in the year before school.

No Commonwealth commitment to preschool beyond 2021

A 2020 review of the National Partnership agreement found it was a ‘major success’ and had ‘precipitated a significant increase in participation in quality preschool (kindergarten) by children in the year before full-time school’.

That review found that before the National Partnership in 2008, just 12% of 4 year olds had access to 15 hours a week of preschool. By 2018, this had increased to 98% of 4 year olds. 

In addition, 90 percent of parents surveyed said preschool meets their families needs. 

The Early Childhood Education National Partnership has been hugely successful. Yet, as the fourth chart shows, there is no funding in the Commonwealth Budget to continue funding universal preschool beyond the end of 2021.

This means universal access to preschool for Australian 4 year olds could end this year. 

The consequences of ending preschool funding would be disastrous for Australian families, and undo all of the progress made over the last decade in lifting access to high quality early education for all Australian four year olds. 

Now is not the time to go backwards. We know the value of high quality early learning for our children. Let’s push on with the reform agenda to make it even better.