The last couple of months have found the whole childcare industry in unchartered waters. The COVID-19 pandemic has put the country and our industry in an unprecedented situation. The country has come to a standstill and people’s lives, careers and businesses have been placed in precarious situations.
Federal Government have stepped in and essentially take over childcare, for the short term effectively nationalising the childcare industry. And while operators had the option to opt in or out- did anyone opt out? To not have opted into this program would have been the death kneel for most privately operated childcare businesses. Something needed to be done, so for now most centres are still ‘open’.
Feedback from the industry seems to indicate that most owners are to varying degrees having to subsidise their businesses. The Federal Governments announcement that childcare was free and that they had saved the industry has caused operators issues as they still need to juggle income and expenses with an understanding from families that care is ‘free’. Staff are stressed, many have had hours reduced as well as dealing with internal politics with staff who are getting paid more than previously, under job keeper schemes, but are working less than others. Directors are trying to work within budget constraints and juggle expectations of families expecting free care.
Nobody believes that centres should financially profit from the Governments package, but what seems lost in all the noise surrounding the COVID-19 pandemic is that many owners are having to prop up their businesses. By now most providers would have an idea how they sit with income vs expenses as the different strands of the government subsidies are coming through and working to minimise their expenses.
The overall picture is that this is a terribly stressful time for owners, Directors, staff, families, and landlords.
Is it coming to an end? Industry and general public sentiment seem to be leading to an end of the Government intervention (including from the Federal Government) by the end of June.
How will childcare return to normal? Some centres will return quite readily, especially in areas with high social economic factors. Some of these areas have had situations where a large percentage of families have maintained employment and income and are in fact saving money with free childcare. I have heard of families that have been prepared to contribute to help their centres survive but the government has mandated no-one could be charged.
Other areas, however, have and will suffer for some time to come with higher levels of unemployment and lower social economic circumstances. These centres will be dreading a ‘snap back’. It would be helpful if the government would consult further with the industry to work out whether there can be options for the return because a, one size fits all model, will not work. ‘Snap back’ in one go will result in a large numbers of centres closing, staff out of work and families looking for alternative care.
There are issues with childcare and the number of new centres coming into the market over the last couple of years. Childcare has been viewed as a very profitable industry to enter. In the past you may have had a handful of centres in an area, some sitting at 100% occupancy and the rest sitting at 80-90%. At these levels, the vast majority of all centres were profitable.
In the last few years, the supply market changed. There were large numbers of new centres opening not necessarily in areas where there was a great need, which is a whole separate issue. It is much rarer to find centres today where occupancy sits at 100% as average occupancies are lower putting a greater number of centres in a more vulnerable position in terms of profitability.
This leads us to where the industry currently stands. To ‘snap back’ to the old system immediately may cause major damage and uncertainty to the industry. The Government needs to come up with a plan to transition the industry back to relative equilibrium where market forces can prevail. If that is end of June, start to formulate with the industry how that will look now, more micro than macro.
It is a forgone conclusion that some businesses will not be viable post the Pandemic. There needs to be an understanding that businesses in some areas, whether metropolitan, regional, or country will recover at different rates due to the difference in their economies, types of industries, and social economic factors. Bringing these areas back to life without contributing to the problem with childcare closures, will require more thought and effort.
Childcare operators want life to go back to normal, for most as previously mentioned, this is costing them money. A rare few will be better off. Let’s be smart about putting the pieces back together so the ‘snap back’ doesn’t exacerbate the problem.