The Childcare and Economic Opportunity Fund
The NSW Government’s Childcare and Economic Opportunity Fund is a landmark investment of up to $5 billion over 10 years to boost access and affordability of childcare.
Childcare providers will be able to bid for funding through a competitive process, commencing in financial year 2023-24, to help them deliver more accessible and affordable childcare.
Funding guidelines will be determined following extensive consultation with early childhood education and care sector and the Commonwealth Government. The funding is intended to be used to expand infrastructure in overcrowded centres, establish new centres in childcare deserts, employ staff or reduce the fees passed on to parents facing some of the highest disincentives to return to the workforce because of childcare costs.
Support will be targeted at areas with low levels of childcare accessibility and where households face the highest financial barriers to working as a result of childcare costs.
To provide industry and families confidence, the State’s investment will be made through a fund – the Childcare and Economic Opportunity Fund (Fund) – which provides long term funding arrangements. This will mean that NSW families and childcare service providers can plan and invest with confidence. Investment from the Fund will be guided by expert independent reports and Department of Education data, which will underpin a long-term plan for the expansion of the childcare system in New South Wales.
The Fund is designed to provide flexibility on funding, so that it can complement the Australian Government’s childcare policy framework. The Australian Government’s current demand side subsidy mechanism provides an important part of the policy architecture, improving affordability, while supporting competition and parental choice. However, as demonstrated by the accessibility challenges of childcare services in parts of New South Wales and the high workforce disincentive rates faced by secondary income earners, it does not address all issues. Research suggests the current problems related to childcare accessibility are likely driven by workforce issues, difficulty in suppliers responding to demand because of the structure of the industry and the short-term nature of demand1. These issues can be addressed through financial support programs targeting providers, which is what the Fund is designed to do.
Because the Commonwealth childcare subsidy arrangements can change, the Fund is also designed to evolve over time to meet contemporary challenges and address gaps that may arise as Commonwealth policy evolves. To that end, the NSW Government will invest $775 million over the next four years. From 2026-27 onwards, and following a comprehensive evaluation, the NSW Government will invest an amount recommended by an independent expert to ensure NSW families have adequate access to childcare at affordable prices to maximise workforce participation. The amount the independent expert can recommended from 2026-27 is capped at $650 million per year indexed to CPI.
The Fund will boost access to high-quality and affordable childcare
It is expected that this funding, together with Commonwealth Government reforms, will support the delivery of approximately an additional 47,000 ongoing and affordable childcare places, ramping up over several years.
In addition, it is estimated that the State’s investment in childcare could potentially save a middle-income western Sydney family currently living in a childcare desert with one child in childcare that benefits from the investment up to $3,900 a year in childcare costs. An equivalent middle-income family living in regional New South Wales in a childcare desert with two children in care that benefits from the Fund could potentially save up to $7,800 a year in childcare costs. These estimates are dependent upon the final design of the Fund, market dynamics and interactions with Commonwealth assistance.
1Warner, Mildred E.; Gradus, Raymond (2009): The Consequences of Implementing a Child Care Voucher: Evidence from Australia, The Netherlands and USA, Tinbergen Institute Discussion Paper, No. 09-078/3, Tinbergen Institute, Amsterdam and Rotterdam at 14-15.