Childcare reforms 'will shut centres'

THREE Gillard government ministers have been warned childcare centres will bust unless reforms to increase staff-child ratios are stalled.

THREE Gillard government ministers have been warned that childcare centres across the nation will collapse unless reforms to increase staff-child ratios are stalled.

The ministers were called on by the Child Care National Association to postpone for two years the reforms that are due to take effect on January 1.

With vacancy rates in centres across the nation at unsustainably high levels, IBISWorld has forecast an industry profit margin of only 0.3 per cent for this year.

Association spokesman Chris Buck said he had relayed his concerns informally to Education Minister Chris Evans and Childcare Minister Kate Ellis. He subsequently had a formal meeting with the staff of Schools Minister Peter Garrett and Ms Ellis to tell them the industry needed immediate assistance.

Mr Buck said the government was in denial about the unsustainability of the system and warned parents were pulling kids out of care and using informal care as costs rose.

The Productivity Commission Report on Government Services for 2010 advised the average utilisation for small childcare businesses to be a low 64.9 per cent, Mr Buck said.

"Profitability is woeful. One of the worries I've got is that the banks will be studying that and they will be saying 'childcare centre in Wodonga prove to me that you are viable'," he said.

"The government can't stick their head in the sand and say this isn't happening. It's their figures."

Mr Buck said people were finding other options for their childcare, including using relatives, to cut costs.

"They are putting them with their grandparents and it's because they are being more frugal," he said.

The new standards will force centres to boost staff-to-child ratios and improve training.

Mr Buck said he had asked the ministers to stall the reforms for two years to ensure they did not cripple the industry.

"We need a slowdown on the national quality framework. If you push the costs up, the utilisation will fall," he said.

The IBISWorld report says good news in childcare is "conditional on shrinking margins for operators".

"Government regulation mandating higher staff-to-child ratios and higher levels of staff qualifications are likely to increase wage costs for operators. As wages make up the single largest cost for childcare providers, operators trying to make a profit in the industry will find themselves increasingly pressured," it says.

"The industry as a whole is barely profitable, primarily due to the presence of not-for-profit community-based centres and a lack of economies of scale."

The report warns that profitability is likely to suffer as non-profit operators continue to proliferate, and increases in labour costs resulting from more stringent regulation cannot be fully passed on in the form of higher childcare fees.

The Australian revealed yesterday that workers would seek a 50 per cent pay rise this year. The United Voice union is planning a long-term industrial campaign to dovetail with new regulations.

The union's assistant national secretary, Sue Lines, said childcare workers with a Certificate 3 qualification -- which is equivalent to a six-month TAFE course -- earned the minimum wage of $17.46 an hour.