Bankwest Future of Business: Focus on Childcare 2018
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Bankwest Future of Business: Focus on Childcare 2018
Contents
Key insights 4
Industry overview 5
What’s driving industry
growth? 6
Spotlight on Australia 7
Spotlight on
Western Australia 8
What does the future hold? 9
What challenges does the
industry face? 10
Where do the
opportunities lie? 11
Forecasted industry growth 12
3
Key insights
Foreword
Understanding factors impacting your industry, centres in the three years to December 2016
and how other businesses in your industry are of 29.4%. Additionally, WA has the highest
performing, can be a great gauge for how your fertility rate of all mainland states of 1.87, giving
business is tracking. investors’ confidence that yields will outpace
those on the east coast in the future.
The Bankwest Future of Business: Focus on
Childcare Report is designed to give you a Looking ahead, the number of children aged
snapshot of the current and expected future 12 and under will grow by 7.8% in the five
state of your industry, which could help you years to June 2022, creating the need for
plan and spark ideas. The report covers 100,000 more childcare placements across the
Australia’s childcare sector, summarising industry. However, growth will not simply come
trends based on statistics from IBIS World, organically. Providers have the opportunity to
the Australian Bureau of Statistics and other diversify their service and activity offerings to
reputable sources. drive revenue growth.
More than 1.2 million children are enrolled and Additionally, increased demand for vacation
attend a childcare centre across Australia, with care and family day care centres, as well as the
the majority of those aged between 0 and 5. new Family Assistance Bill will create greater
Record female participation in Australia’s labour need for childcare centres to understand their
market and the growing number of children customers and whether they should position
aged between 0 and 12 saw revenue grow themselves as having a cost competitive or
by 12.0% to $12.4 billion in the year to June value add focus.
2017. This created an 8.1% surge in childcare
employment in the year to August 2017.
The significant rise in industry revenue comes
despite sluggish income growth and declining
fertility rates across the nation. Western
Australia continues to experience strong growth
in the childcare sector, with the state recording
the highest increase in number of childcare
4
Industry overview Breakdown
This report covers the childcare industry, which includes long day care, family day care, vacation There are approximately 1.2 million
care, occasional care, in home care and out of school hours care (OSHC). children across Australia using
government approved childcare services
There is a growing appetite for parents enrolling their children in childcare outside of school hours. and this figure is growing. The rising
The number of children attending vacation care increased by 15.7% in the year to December 2016, number of parents using childcare
while OSHC increased by 7.3% during the same period. New regulations affecting educator to child services has underpinned revenue
ratios in family day care centres in January 2016 saw the number of children attending family day growth of 12.0% to $12.4 billion in the
care centres fall by 3.2%. year to June 2017 and employment
growth of 8.1% during the same period.
Number of children attending childcare by childcare type: Revenue
2017: $12.4 billion
2015 2016 % Increase 2016: $11.1 billion 12.0%
Employment
Long day care 660,602 677,237 2.52%
2017: 152,500
2016: 141,100 8.1 %
Family day care 196,216 190,000 -3.17%
Number of
providers
Vacation care 181,363 209,798 15.68% 2017: 10,400
2016: 10,059 3.4 %
OSHC 323,913 347,685 7.34%
Customers
2016: 1,220,549
Total 1,188,218 1,220,549 2.72%
2015: 1,188,218 2.7%
Source: Productivity Commission 2017
5
What’s driving industry growth?
Growth in the number of children aged under 12 is driving demand for childcare in Australia.
Total children under 12 = 3.7 million
7.5%
Under 2 Under 6 Under 12
Revenue growth in childcare has far outpaced the increase in Australia’s under 12 population.
A notable driver of this has trend been an increase in Australia’s female participation rate to 59.9%,
up 1.2 percentages points in the five years to October 2017.
The introduction of flexible working practices among Australian employers is allowing parents
to stay in the workforce and use childcare when required. The number of Australians who cited
workplace flexible working options as important in accepting a job increased by 21.0% in 2016.
Female participation rate (2012 - 2017)
How are childcare
60.0%
services driving
59.5%
revenue growth?
59.0%
More services offered by 58.5%
childcare services
58.0%
57.5%
Longer opening hours
57.0%
2012 2013 2014 2015 2016 2017
Greater flexibility in Source: ABS 6202
length of session times
1
Refers to growth in population in five years to June 2016
6
Spotlight on Australia
Childcare centres have had to deal with rising costs due to regulation requiring lower educator
to child ratios and increased skill requirements for childcare facilities. Childcare services saw
costs rise by 29.2% in the five years to September 2017, compared to an average of 18.9%
Families are preferring more
across all industries. intimate care arrangements
and longer operating hours,
Producer Pride Index, Childcare & All Industry (2012 - 2017) with some childcare centres
140.0
135.0
Childcare services All Industry* mixing the ages of children
130.0 within the rooms to simulate
125.0 an ‘at-home’ environment.
120.0
115.0
110.0
105.0
100.0
2012 2013 2014 2015 2016 2017
Source: ABS 6427
Rising demand for childcare services saw costs for long day childcare rise by 3.7% in the year to
December 2016 and 9.5% compared to 2014. Growing childcare use has also coincided with a
decline in the use of informal care (i.e. babysitters) over the last 10 years.
Growth rate in services (2013 - 2016)
100%
80%
60%
40%
20%
0%
-20%
Long day Family day Vacation day OSHC Occasional In-home Total
Source: Productivity Commission 2017
Family day care centres have seen the largest growth in approved services, growing by 77.6% in
the three years to December 2016, likely driven the new National Quality Framework
(NQF) standards.
*All industry is average of health care and social industries for which data is provided from the ABS
7
Spotlight on Western Australia
Western Australia has seen the largest increase in new childcare centres in the three years to
December 2016, rising by 29.4%, with the next largest increase of 17.1% in the ACT.
Increase in childcare
services 2013-2016 (%)
NT 11.6%
QLD 10.1%
WA 29.4%
SA 8.7%
NSW 15.3%
ACT 17.1%
Australia 14.6% VIC 15 .7%
Source: Productivity Commission 2017
TAS 1.1%
Western Australia’s strong growth in childcare has been underpinned by the highest growth rate of
its population under the age of 12 nationwide. The number of kids under 12 in WA grew by 11.9%
in the five years to June 2016, compared to the national average of 9.7%. This trend is expected to
continue, with WA’s under 12 population projected to grow by 14.8% in the next 5 years, compared
to an increase of just 7.5% nationally.
8
What does the future hold? The Family
Growth in Australia’s younger population will underpin strong growth in the industry in the next 20
years, providing opportunities for all childcare centres to grow. Assistance Bill
Australian population aged 12 or under (2017 - 2037)
5.0
4.8 Activity test2 to assess
maximum hours of
4.6
subsidised childcare
4.4 for studying, working
or training parents
4.2
4.0
2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037
Source: ABS 3222 $1 billion safety net
for families earning
Government childcare fee assistance to increase less than $65,710
per annum
From 1 July 2018 the childcare subsidy will replace the existing childcare benefit and childcare
rebate. The government’s childcare fee assistance is expected to rise by 38.8% in the four years to
June 2021 to $10.0 billion, up from $7.2 billion in June 2017.
The introduction of the new Family Assistance Bill will drive industry Capping subsidies to
revenue as well as establish a two-tiered system, creating a need for limit price increases
childcare centres to understand if their customers have the capacity to pay
beyond the subsidised rate.
2
The new activity test will determine the maximum number of hours of subsidised care a family will receive. This is
based on several activities including hours of paid work, training, studying, volunteering and paid parental leave.
9
What challenges does the
industry face?
The success of Australian childcare providers will depend on their ability to overcome industry
challenges and retain quality staff. Australia’s childcare industry experienced several strikes in
2017 due to:
Stagnant Smaller educator Longer
wage growth to child ratios opening hours
Adoption of NQF Overall quality ratings
(Australia November 2017)
Despite large
adoption of increased Exceeding NQS
requirements imposed
under the NQF, as of Meeting NQS
November 2017 25.2%3
of childcare services Working towards NQS
were still working
towards satisfying the Significant
Source: Australian Children’s Education
new standards. improvement required & Care Quality Authority 2017
3
Australian Children’s Education & Care Quality Authority 2017
10Where do the opportunities lie? Nutrition
Australia’s childcare industry is in a growth phase, however limited barriers to entry, regulatory
change and low wage growth mean childcare centres must constantly look for opportunities to Growing concern with nutrition and
diversify, grow and add value. meal options at childcare centres is
creating an opportunity for centres to
Childcare providers should consider offering value-added services and activities to drive revenue
promote and provide balanced eating
growth and play a larger role in secondary education services. Activities that some providers are
options for children and differentiate
looking to introduce include:
through their menus. A recent study
found that only 5.0% of childcare
services were satisfying Australian
government nutritional benchmarks4.
Secondary Cooking
Sport classes
language classes activities
Projected growth in Australia’s childcare population
Future growth in Australia’s younger population continues to create opportunities for childcare
centres to cater to the care needs of parents of the under 12s.
A more subdued property
market, the largest fertility
rate of all mainland states
of 1.87 and strong investor
6.8% expectations are tipped to
provide strong yields for WA
10.5% childcare centres upwards of
6.0% in the short term.5
17.9%
4
Healthy Australia 2017 5
Ray White 2017
11Forecasted industry growth
Continued growth in Australia’s younger population, rising female participation rates and
increased service offerings will drive industry demand with revenue projected to reach $16.4
billion by 2022, a 32.4% increase on the June 2017 revenue of $12.4 billion.
Childcare revenue in Australia (2007 - 2022)
18
Actual Projected
16
14
12
10
8
6
4
2
0
Source: IBIS 2017
Growth in industry revenue will outpace growth in providers, leading to a 18.7% rise in the scale of
providers in the five years to June 2022.
Revenue per provider (2012 - 2022)
$1,600,000
Actual Projected
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Source: IBIS 2017
1213
Sources
Allday, A. Babysitting and Other Personal Services in Australian Government Budget 2017-2018, Budget
Australia, IBISWorld, November 2017 Paper No. 1, Canberra, 2017
Australian Government Productivity Commission, Australian Government Department of Education and
Volume B: Childcare, education and training, Training, The New Child Care Package, 2018-01-22
Canberra, 2017
Australian Children’s Education & Care Quality
Australian Bureau of Statistics 6291.0.55.003 Authority, NQF Snapshot Q3 2017, Sydney, November
(December 2017), Labour Force Australia Detailed 2017
Quarterly, Nov 2017, available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/ Harrison, S. Childcare centre asset class heats up in
DetailsPage/6291.0.55.003Nov%202017 WA, new Ray White Commercial report shows, Ray
White, November 2017
Australia Bureau of Statistics 3101.0 (September
2017), Australian Demographic Statistics, March 2017, ManpowerGroup Solutions, Work for Me
Table 1, available at: Understanding Candidate Demand for Flexibility.
http://www.abs.gov.au/AUSSTATS/abs@.nsf/ Sydney, 2017
DetailsPage/3101.0Mar%202017
Mullaly, J. Preschool Education in Australia, IBISWorld,
Australian Bureau of Statistics 6202.0 (January 2018), February 2017
Labour Force Australia, December 2017, Table 1,
available at: Richardson, A. Child Care Services in Australia,
http://www.abs.gov.au/AUSSTATS/abs@.nsf/ IBISWorld, March 2017
DetailsPage/6202.0Dec%202017
Wilkins, R. The Household, Income and Labour
Australian Bureau of Statistics 3301.0 (December Dynamics in Australia Survey: Selected Findings from
2017), Births Australia, 2016, Table 1, available at: Waves 1 to 15, Melbourne Institute: Applied Economic
http://www.abs.gov.au/AUSSTATS/abs@.nsf/ & Social Research & The University of Melbourne,
DetailsPage/3301.02016 Melbourne, 2017
Australian Bureau of Statistics 3222.0 (November
2013), Population Projections Australia 2012 (base) to
2101, Population Projections Fact Sheet, available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/
DetailsPage/3222.02012%20(base)%20to%202101
14At Bankwest, we know
that Business Banking
is about more than just
financial solutions.
We provide banking solutions to many of Australia’s leading
businesses, including those in childcare. Whether you require
straightforward banking or a more customised solution, our team
of experienced banking specialists can help.
Speak with one of our Business Banking
Specialists today. Call us on 13 7000.
15The information contained in this report is of a general nature and is not intended to be nor should be considered as professional advice. You should
not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest,
a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and
contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining
from acting as a result of anything contained in this report.
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