The number of day care services is in decline and providers in some parts of Australia need financial backing, a new report shows.

The Australian Competition and Consumer Commission released its childcare report on Monday following an inquiry into the industry, finding markets were not delivering on accessibility and affordability.

Labour was the main cost in supplying child care, accounting for 69 per cent of the total costs for centre-based day care services, the report found.

The consumer watchdog recommended governments consider a market stewardship role to monitor and regulate child care, with a key focus on identifying under-served markets.

“There has been a decline in availability of family day care services, which has reduced flexibility and options in the market,” the ACCC report reads.

It says educator labour force shortages were affecting all childcare markets.

The inquiry was told there were “childcare deserts” that couldn’t attract capital and government intervention was needed.

Childcare rebates for more than one million families started in July 2023, but the report said fees “have grown faster than inflation and wages since the introduction of the Child Care Subsidy”.

The design and implementation of the rebates had only “limited effectiveness” in placing downward pressure on fees and constraining the burden on taxpayers, the report found.

Since the Albanese government’s subsidy measures were introduced, the average reduction in out-of-pocket expenses for centre-based day care was 11 per cent.

Households with the lowest incomes experienced the greatest drop in expenses, but still spent the largest proportion of their disposable income on child care.

Commission chair Gina Cass-Gotlieb said a body could be more actively monitoring the pricing in a bid to bring down costs.

“Where there are outliers who are … consistently and significantly above the

(hourly rate cap) that one option may be to publicly identify them,” she told AAP.

Chief executive of advocacy group The Parenthood, Georgie Dent, urged the government to prioritise universal early childhood education.

“We join the ACCC in urging the government to pursue bold reforms that prioritise truly universal early childhood education and care for the benefit of children and families,” she said.

Education Minister Jason Clare said the report revealed more work was needed to make child care more accessible.

“The government will consider these along with the recommendations of the Productivity Commission which is due to report in a few months,” he said.

Early Childhood Education Minister Anne Aly backed earlier reforms but said alternative approaches for vulnerable groups would be considered.

“Our Cheaper Child Care reforms are delivering for families, reducing out-of-pocket costs and ensuring more children can access the transformative benefits of early learning,” she said.

The opposition’s early childhood education spokeswoman called for solutions instead of more reviews.

“Australian families deserve better,” Angie Bell said.

“They deserve to know what the government is going to do to fix issues affecting the sector – including lack of access, and workforce concerns.”

An interim report found childcare fees in Australia rose by 22.8 per cent between 2018 and 2022, compared with an average of 6.2 per cent for other developed nations.

Tess Ikonomou
(Australian Associated Press)