Parents in Australia with school-aged children are currently grappling with the expenses associated with Outside School Hours Care (OSHC), which includes supervision before and after school as well as during school breaks. For many families, this situation often involves engaging with private equity firms that are known for their aggressive business practices.
The two leading players in the OSHC market, Camp Australia and Junior Adventures Group (JAG), together control roughly 20 percent of the sector and are backed by Bain Capital and Quadrant Private Equity, respectively. Bain Capital previously attempted to acquire JAG, but the Australian Competition and Consumer Commission (ACCC) blocked the move.
Private equity firms are drawn to the OSHC sector due to its unique operational structure. These businesses do not require ownership of physical property; they operate directly on school grounds and pay schools a percentage of their revenue, typically between 10 to 15 percent, instead of a fixed rental fee.
Once these companies establish a contract with a school, they effectively create a monopoly, leaving parents with limited options for childcare unless they have alternative arrangements, such as relying on family. The situation is compounded by government subsidies that support the fees, making it a lucrative business model.
OSHC services account for approximately 30 percent of Australia’s early childhood education and care (ECEC) landscape and have become particularly relevant as families navigate the current school holiday period. For many parents, this concern persists throughout the year, as they often must leave for work before school starts and may not return home in time for the 3 p.m. pick-up.
Like much of the childcare sector, OSHC services are costly and raise concerns about child safety and supervision—parents can only trust that their children are in capable hands while they are away.
Australia’s education and childcare framework has become increasingly complex and expensive, particularly for those with children under the age of five. This segment is almost entirely privatized, with around 70 percent of providers operating for profit, many of which are publicly listed or owned by private equity firms. Parents receive subsidies from the federal government through a means-tested voucher system capped at $140 daily, compelling them to navigate the system to find suitable childcare options.
Pricing and quality vary widely, relying on market competition. This resembles the Medicare system, where a subsidy is provided, but the childcare center charges fees that may leave families with significant out-of-pocket expenses, especially if both parents have substantial incomes.
Once a child turns five by the end of July, they can access free education provided by the state until 3 p.m., after which parents may need to enlist a private service to look after their child until they finish work.
In terms of educational institutions, around 37 percent of primary and secondary schools in Australia are private, with 20 percent being Catholic and 17 percent independent. These schools also receive federal subsidies, but unlike the childcare sector, financial assistance is primarily available to not-for-profit schools, which can also benefit from tax-deductible donations.
Housing costs and childcare expenses are interconnected issues that highlight Australia’s intergenerational equity dilemma, a topic frequently addressed by Treasurer Jim Chalmers. Over the past quarter-century, house prices have doubled relative to income, paralleling a sharp rise in childcare costs, compelling both parents to work and manage their mortgage payments.
Older generations, having typically paid off their homes, may assist their adult children financially, but this support is optional and can be viewed as diminishing for the recipients who prefer to achieve independence.
Recently, I proposed the idea of nationalizing the childcare sector to provide free services, similar to education for children over five years old. This suggestion garnered considerable support on social media, although it also faced backlash, with some critics labeling it as a communist idea.
Financial commentator Alan Kohler has echoed the sentiment, advocating for the nationalization of childcare to make it free by extending public education to include children under five. However, for those who favor free-market principles, it is unlikely that such nationalization will occur, despite evidence indicating that government-run centers tend to be of higher quality, safer, and more affordable than their private counterparts. The primary and secondary education system is predominantly government-owned, with the remainder being non-profit.
A more practical approach could involve adopting Canada’s model, where the government provides direct funding to licensed childcare providers under the $10-a-day Canada-wide Early Learning and Child Care (CWELCC) initiative. This program offers substantial financial support to childcare centers for their operational costs in exchange for reduced and capped fees. While participation is voluntary, providers that opt out forfeit government funding and the associated fee reductions for parents. The implementation of this plan occurs in stages, with initial reductions in fees already taking place.
