Chiang Lim, the chief executive of the Australian Childcare Alliance NSW division, which oversees the interests of 1600 privately owned childcare centres catering for 125,000 families, said there had been no coherent policy across the federal government and state governments to ensure that demand and supply in geographic areas were being matched sensibly in a market where taxpayer subsidies were now running at $7 billion a year and set to rise.
"It's basically been a free-for-all," Mr Lim said.
Childcare centre operators had been stepping up their marketing efforts to entice families as they battled oversupply in certain pockets of Sydney. This had been replicated in other states.
A slippery slope. Childcare is proving a tough business for many operators because of an oversupply of places.
"We've seen instances where people are offered a free iPad or an offer of we'll pay your groceries for a week, or you'll get a free trial for a month," he said.
Mr Lim said the oversupply was causing upheaval in the sector.
Uneven and fragmented
It comes as a new report by the Centre for Independent Studies found that childcare fees in Australia had been growing well above inflation since 2011. The report by CIS senior policy analyst Eugenie Joseph found that across all childcare service types, hourly fees increased on average by 20.7 per cent in real terms between 2011 and 2017.
She concluded that taxpayer subsidies for childcare had "proven unsuccessful" in delivering affordable services and containing price growth.
Ms Joseph said that the supply of childcare services in Australia was uneven and fragmented. "Oversupply of some types of childcare appears to be a problem in some urban areas of Australia, while shortages and waiting lists are occurring in other areas."
The CIS said regulation had been one of the reasons why childcare costs had been rising.
A National Quality Framework introduced in 2012 and phased in progressively by the states and territories since then on minimum staff-to-child ratios and qualification standards for childcare workers had resulted in centres employing more staff, and having those workers invest in costly qualifications.
"These costs are being passed on to parents in the form of higher fees," she said. Ms Joseph said there was an inherent tension in government policies which on one hand reduced childcare costs through price subsidies but on the other hand drove up costs through a complex regulatory system.
Mr Lim said hefty taxpayer subsidies into the childcare industry by federal governments on both sides of politics over many years had brought new players into the industry, without appropriate planning systems overseeing where more supply was needed. "When you have successive commonwealth governments trying to create the solution, you get a lot of new entrants into the market," Mr Lim said.
The federal government in early July introduced a new Child Care subsidy system which provides a single means-tested payment which reduced the amount that most families pay for childcare.
Mr Lim said a comprehensive rethink of childcare regulation and policy was needed.
"There's two customers here, the parents and the taxpayer who are funding the transaction," he said.
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