The numbers stack up. Each week, more than 790,000 children from about 650,000 families use long day care. Coupled with strong government support, that provides investors certainty, Banting’s analysis reveals.
“Given we’ve got strong macroeconomic tailwinds, childcare is where we really want to invest and where we think investors will want to move during this more volatile investment market,” Banting says.
“We look for opportunities where we might have a virtual monopoly by the fact that we are the only childcare centre in a community, or the highest quality centre in a large catchment area.”
The key to making the investment work is to partner with organised, efficient and well-researched operators who undertake detailed diligence on locations where there is strong demand. “We, of course, also do our own due diligence to confirm that business case,” he says.
While the sector faces challenges, the real estate assets have strong market value. “Generally, assets that are closer to CBDs and major population centres tend to be higher value as their capitalisation rates tend to be slightly tighter and the day rates that they’re able to charge tend to be slightly higher,” he says.
Another way to consider profitability is to weigh up the likely occupancy rates, he says.
“Operators with 85 per cent occupancy rates have efficient operations. But equally, they might charge a premium because of the services and facilities that they provide at a higher quality.”
Banting admits the future trend suggests there could be tough times ahead due to increased construction and capital costs affecting the feasibility of new centres, but believes the trend could be short-lived.
On the ground, however, the childcare sector faces systemic issues. It’s too expensive, for one.
Research conducted by Victoria University’s Mitchell Institute found that one in three families were spending more on childcare than on groceries to feed their families, while 85 per cent of families were spending more on childcare than on their utility bills.
But positive steps are being taken. The Albanese government’s childcare pledge includes $4.5 billion to reduce costs, which will reduce out-of-pocket expenses for a typical family by 37 per cent from next July.
From 2025, the government wants to move to a universal 90 per cent subsidy for all families. The details will be worked through by a Productivity Commission inquiry next year.
But the rates of pay for childcare workers are also widely accepted as far too low. The average salary in Australia is between $55,000 and $65,000, according to job site Seek.
Gender equity advocate Sam Mostyn, who was recently appointed to head up the government’s women’s economic equality taskforce, says the social infrastructure that got everyone through the pandemic has generally been undervalued, underpaid work often tackled by women in frontline roles in the caring professions, including education and childcare.
“When it comes to childcare, women have long been doing more of the heavy lifting. Culturally, we have assumed that women do caring-related jobs while men have access to opportunities, security, respect,” Mostyn says.
All too often, men can seemingly waltz into generally better paying roles in financial services, construction and mining, which offer more security and better salaries, she says. “What holds back so many women in particular is the lack of availability and affordability of high-quality childcare.
“What we hope to see over time is a review of wages and conditions of early educators and carers to understand how they plan to deal with the gender norms and the pipeline for early childcare workers and educators to understand where the workers are going to come from,” she says.
Mostyn is relieved there has been more focus from the government on addressing the structural barriers to women’s participation. “There are hundreds of people who would like to earn more and have more security in their job in this country, predominantly women,” she says.
She has also been buoyed by the Albanese government’s commitment to better address childcare fees and the recent announcement that a royal commission into childcare has been called in South Australia to enable equitable and improved outcomes in that state.
But until there is change, she remains sceptical and will continue to lobby for that day to come.
Meanwhile, Australia’s childcare sector is limping along without enough staff to service existing demand.
It’s little wonder the industry has an image problem, with reports indicating the workforce struggles with stress, burnout, low wages and poor opportunities for career progression.
Wages and conditions for teachers and educators in the early childhood sector lag wages paid to teachers and educators in the schools system.
— John Cherry, Goodstart Early Learning head of advocacy
Childcare workers recently held a strike for better pay as part of nationwide industrial action involving thousands of workers. Many childcare workers have been resigning, given there are plenty of better paying jobs in today’s tight labour market, with 7300 vacancies in the sector in the September quarter.
Exit surveys cite low pay, burnout and a lack of professional recognition as key reasons for the resignations.
The staff shortages have forced up to 100 Goodstart Early Learning centres across the country to cap enrolments.
The childcare operator wants the federal government to fund a pay rise to stave off labour shortages gripping the sector, saying the case to invest in early childhood as part of economic policy is compelling.
Head of advocacy John Cherry says the pay increase could be funded from the cost savings realised in the $4.5 billion childcare subsidy program rolling out in July.
The childcare pledge from the government will reduce out-of-pocket costs for a typical family by 37 per cent and allow parents to take on full-time jobs.
From 2025, the government wants to move to a universal 90 per cent subsidy for all families, the details of which will be worked through by a Productivity Commission inquiry next year.
But the childcare industry has grave concerns that it can find the estimated 10,000 additional educators and childcare workers needed by next year when more parents call their local centre to take advantage of the cheaper spots.
“Workforce attrition rates have never been higher. To pay for matching school wages, we would need to increase fees by 15-20 per cent, which we know parents can’t afford,” Cherry says.
“Wages and conditions for teachers and educators in the early childhood sector lag wages paid to teachers and educators in the schools system, even though both are vitally important to children’s learning,” he says.
The chief executive of advocacy body Early Childhood Australia, Samantha Page, says a more permanent solution to attract talent is needed. “Poor pay and conditions are among the top reasons why educators and teachers leave the sector.”
“We need a solution that immediately addresses lagging pay and conditions in the sector to hold the sector steady while the longer-term structural reforms are progressed to remunerate teachers and educators commensurate with the professional contribution they make,” Page says.
Steps towards greater professional recognition will also make the sector more appealing. “We not only need to attract new professionals, we need to do more to retain the workforce that we have and attract those back who have left the profession.”
Childcare centres are bending over backwards to keep their staff. Cherry points says Goodstart already pays above-award wages and plans to take on hundreds of trainees next year.
In NSW, Little Zak’s Academy has been investing resources to bolster employee wellness and mental health for its 400-plus staff in a bid to retain talent.
Staff across the 25 centres also have access to a full employee benefits scheme, which includes a retention bonus, above-award remuneration, a gym membership and financial assistance to further their qualifications.