Childcare sector 'sleepwalking' into market domination

Families may have to pay more for childcare as large, for-profit providers dominate the early education sector.

The federal government has proposed a host of reforms that will give workers a 15 per cent wage rise over two years, with the Commonwealth covering the cost for providers that don't increase fees over a nominated cap.

The bump has been welcomed across the board and provides a positive indication the government could address other important issues like market concentration, according to Caroline Croser-Barlow, chief executive at early learning advocate The Front Project.

"We are sleepwalking into a market that is going to be dominated by large, for-profit providers," Dr Croser-Barlow told a parliamentary inquiry into the wage boost.

"Large, for-profit providers, on average, are lower quality, higher costs for families and pay their staff less."

Meanwhile, smaller operations are being driven out of gentrifying areas, she said.

There are also concerns the pay increase could add extra burdens on these not-for-profits, Early Childhood Australia chief executive Samantha Page noted, and greater support must be provided.

"We are conscious of concerns amongst smaller, not-for-profit and privately owned services, who find this a very daunting landscape, who may not have engaged in collective bargaining industrial processes before ... and are struggling to decide whether that is something they can manage," she said.

Teachers and unions have also applauded the $3.6 billion wage boost as workers on awards are expected to get an extra $155 per week.

However, they don't want the temporary measure to end, arguing the point of the payment was to ensure wages were secure and staff were retained long-term.

While noting it was important to ensure workers in the childcare industry earned higher wages, the Business Council of Australia raised concerns about profitability in the long run when government funding drops off.

The money goes across two years but enterprise agreements are often locked in for up to four years and require renegotiation "in perpetuity" as there are limited options to terminate it once in place, it said in a submission to the inquiry.

The council also scrutinised the fee increase cap - 4.4 per cent in 2025 - the government would set each year to ensure costs weren't passed on to parents.

Centres may be forced to make savings in areas "such as meals and consumables for children in care" to maintain profits, it said.

The payments were crucial to setting up the foundation for universal childcare and addressing the 21,000 qualified childcare teacher shortfall, the Department of Education said.

But there is also a need to build and support local workforces, John Burton, executive director at peak body for Aboriginal and Torres Strait Islander children SNAICC.

"There is a risk with higher wages that it will drive more in-and-out workforce in the community, rather than addressing the more complex and underlying problems of building the capability and qualifications of Aboriginal and Torres Strait Islander people within their own communities," he said.

The pay bump will help Indigenous Australians enter the workforce but that must be supported by targeted development and qualification programs.