About the paper
This paper evaluates the costs and benefits of the early childcare regulations which are specific to NSW.
The Commission finds that moving to the national standards could have benefits for NSW of around $3.1 billion in net present value terms, or $410 million per annum. The impact of the regulatory change on the workforce participation of parents alone could boost Gross State Product by $180 million per year over the long term. Adopting national standards could also help improve educational outcomes for children that attend early childhood education and care (ECEC) services due to the associated reduction in cost and increased availability of childcare places.
ECEC services in NSW must employ more degree-qualified early childhood educators than centres elsewhere in Australia. In addition, all NSW ECEC centres must operate with staff-to-child ratios of at least 1:10 compared to the national standard of 1:11 for children aged 3-6 years.
The stricter staffing requirements in NSW increase the cost of childcare by up to nine per cent—or $230 million—and decrease earnings of parents by up to $180 million annually as they stay at home to look after children. The cost of NSW maintaining stricter requirements equates to around $3,000 for each child attending ECEC per year.
The costs of the stricter regulatory requirements likely exceed the benefits. For the stricter regulations to be economically worthwhile, the benefits would need to be equal to around five months of additional schooling. This does not appear to be the case.
The educational outcomes of children in NSW are not any better than comparable states that do not have the stricter ECEC staffing requirements. Previous studies have found that slightly stricter staff-to-child ratios may have a small positive to no impact on educational outcomes of children. An Australian study also found no difference in educational outcomes between pre-school children taught by university-educated teachers and diploma-educated teachers.
Even if national standards are adopted in NSW, higher-standard care will likely remain available. ECEC service providers may choose to exceed minimum standards to position themselves as ‘higher quality’ providers, and families may choose to send their children to these providers.