The re-elected Andrews Labor government in Victoria moved quickly to announce 785 new facilities and expansion of 170 others to deliver the policy.
Goodstart advocacy manager John Cherry said careful implementation was required to avoid making problems with oversupply and teacher shortages worse.
“There has been a massive building boom in Victoria in terms of long daycare centres and there are real problems in the outer suburbs in terms of oversupply,” Mr Cherry said.
“If the Victorian government then enters the market and decides they are going to build hundreds of new preschools on top of that it could actually collapse the entire Victorian long daycare market.”
Several years ago Australia was desperately short of childcare places. The situation has now completely reversed in many areas. But the glut has not led to lower fees, with operators blaming fixed costs, including rent and staffing.
Occupancy rates vary widely. A fifth of childcare centres in regional Australia experienced occupancy rates of less than 60 per cent in 2017, according to one study. On the other hand, Goodstart Huntley Street opened two years ago in high-growth Sydney suburb Alexandria and has consistently had an occupancy rate of 95 per cent.
“There’s a massive shortage of early childhood teachers across the country and, certainly if we’re trying to split them between an over-supplied long daycare sector and rapidly expanding preschool sector, it would quickly become unsustainable,” Mr Cherry said.
Australian Childcare Alliance president Paul Mondo said there was enough existing capability in the system to extend preschool to three-year-olds.
“It would be a waste of taxpayer dollars to build all of this new infrastructure when, by and large, the system is already well on the way to being able to deliver,” Mr Mondo said.
“Where the caution is if all of a sudden you have a large number of three-year-old children being withdrawn from the long daycare sector, the viability of a whole lot of those services becomes quite significantly impacted.
“Unfortunately, there would then be some impact on fees in that space.”
Federal Labor’s early childhood spokeswoman, Amanda Rishworth, said all stakeholders would be consulted to make the policy work.
“There is going to be an increase in need for places in the full range of settings, which we will work with the states and territories, and sector, to deliver,” Ms Rishworth said.
A Victorian government spokesman said three-year-old preschool was the “largest social, economic and educational reform ever undertaken in early childhood learning in Victoria’s history”.
“A change of this size can’t be done just using existing facilities,” he said. “We know we will need to build new facilities and the workforce.”
The Victorian government spokesman said the rollout would begin in regional areas, where there was capacity in existing facilities, and long daycare centres could apply for funding to teach three-year-old preschoolers.
Both governments have also announced extra support for TAFE training.
G8 Education managing director Gary Carroll said market conditions had been very challenging due to oversupply over the past two years.
He expected the situation to continue in the first half of 2019 but start to turn around in the latter half of the year.
G8 runs its childcare centres under 23 brands that include Headstart, Greenwood, Buggles, Jellybeans, Bambinos, Great Beginnings, Sandcastles, Penguin Childcare and Pelican Childcare.
In November it identified 32 “underperforming” centres across its network of 500.
Mr Carroll told The Australian Financial Review that changes to childcare subsidies in mid 2018 reduced out-of-pocket costs for 80 per cent of families, which would help correct oversupply.
“As in prior years, G8 Education will be reviewing its fees during the year and will be likely to modestly increase its fees in 2019 in line with the rest of the sector.”
Non-profit Goodstart operates 644 early learning centres accommodating 70,900 children.
“In the last financial year we closed more centres than we opened,” Mr Cherry said.
“Some of that was non-viable centres, some was end-of-leases.
“We’re certainly still seeing crazy numbers of development applications going to councils for childcare centres across the country.”