Some experts warn Australia’s childcare system is at breaking point, notwithstanding the enormous taxpayer subsidies flowing into the sector.

While Labor’s recent boost to subsidies has improved the affordability of childcare services, at least in the short term, the sector faces two other big challenges: accessibility and quality.

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Too many families still can’t get the childcare services they need, regardless of the cost. A recent study by the Mitchell Institute found about one-third of the Australian population lives in neighbourhoods classified as “childcare deserts” where there are fewer than 0.33 childcare places per child. While some outer suburban areas are affected, those childcare droughts are most common outside big cities. The economies of many regional towns are being hampered by a lack of childcare services.

There’s plenty of evidence good childcare can deliver substantial long-term economic benefits, especially for disadvantaged families. But quality across Australia’s childcare sector varies. According to the Productivity Commission, about one in 10 services don’t meet the National Quality Standard introduced in 2012. The commission also found services run by not-for-profit providers have better quality ratings, with 34 per cent exceeding the standard, compared with only 13 per cent of services run for a profit.

Since the early 1980s the Australian economy has been transformed by the introduction of market forces into sectors previously owned, or tightly regulated, by governments. This has worked well in some sectors, lifting competitiveness and benefiting consumers.

But even the Australian Competition and Consumer Commission (ACCC) has now raised questions about the market-based childcare system. A year-long ACCC childcare inquiry released in January concluded that “market forces alone are not meeting the needs of all children and households”. It also found childcare was less affordable in Australia than in almost all comparable countries.

The faults in Australia’s childcare model were obvious to some experts decades ago.

Patricia Apps, a professor in public economics at the University of Sydney who has written extensively about childcare, told me in an interview in 2006 that Australia’s system was prone to market failure.

It was unrealistic, she said, to ask young parents to pay the day-to-day cost of childcare as well as funding a healthy return for investors. The costs of providing high-quality childcare are similar to the cost of a private school, and people on regular incomes simply couldn’t afford it without a high level of government support.

“What you need to do is develop the infrastructure and training for childcare in public ownership or, at the very least, not-for-profit,” she said at the time.

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Now, the Productivity Commission is reviewing the sector; the terms of reference say the Labor government wants to “chart the course” to universal and affordable childcare in the tradition of universal Medicare and universal superannuation. This is a rare opportunity to fix the system.

The commission’s draft report, released late last year, recommended a $2.5 billion lift in childcare spending to ensure families earning less than $80,000 a year can get free care for three days a week.

But it fails to provide the blueprint for universal access to which the Albanese government aspires.

More tinkering with federal subsidies won’t deliver the childcare system Australia needs – only a radical overhaul that, perhaps, makes childcare more like school will do that. State governments, with their vast schooling infrastructure, could play a crucial role and should be part of the conversation.

The Productivity Commission’s final report, due later this year, must produce a detailed plan, probably spanning a decade or more, outlining the specific steps needed to deliver a genuinely universal childcare system.

Then Labor must have the grit to implement it.

Matt Wade is a senior economics writer at The Sydney Morning Herald.

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