Australia's Childcare Inclusion Crisis: Funding Gaps Leave Children with Complex Needs Behind

Australia's early childhood education sector is confronting a critical inclusion crisis. The federal government's flagship program intended to support children with complex needs in mainstream childcare is failing due to systemic underfunding and operational delays, according to industry leaders and advocates. This failure is forcing childcare centres into an impossible position: absorb unsustainable costs or turn away vulnerable children, undermining the very principle of inclusive education.

The Flawed Mechanics of the Inclusion Support Program

Introduced in 2016, the Inclusion Support Program (ISP) was designed to provide financial assistance to childcare centres needing extra staff to support children with disabilities or complex additional needs. The program offers funding of $23 per hour for up to 25 hours per week for an additional educator. However, this rate has not been indexed since its inception, while wages and operational costs in the childcare sector have risen dramatically. According to a report by The Guardian, the funding now covers only about half of the actual cost, leaving centres to fund the substantial shortfall.

The application process itself creates significant barriers. A child must first receive a formal diagnosis before a centre can apply for ISP funding. This diagnostic requirement excludes children whose needs are apparent but not yet formally classified. Once an application is submitted, centres face wait times of two to five months before funding is approved, leaving children unsupported during a critical period of adjustment.

Real-World Consequences: Turned Away and Staff Burnout

The practical impact of these systemic failures is severe. Families report being asked to leave centres because the facility cannot afford to wait for funding approvals. One parent, Nawaz, shared his experience with The Guardian where his son Zayne, who has a speech impediment and behavioural issues, was turned away from two Sydney centres while awaiting NDIS funding, which operates alongside the ISP. This disruption is particularly harmful for young children who thrive on consistency and routine.

For childcare workers, the strain is immense. Paul Mondo, President of the Australian Childcare Alliance, notes that children with complex needs often struggle most when first entering care, precisely when support is least available. This places "undue pressure" on educators, contributing to high rates of burnout and staff turnover. Research by Karen Thorpe from the University of Queensland identified inadequate ISP support as a key factor driving educators to consider leaving the profession, especially when high-needs children are present without adequate staffing ratios.

The Growing Scale of the Challenge

This is not a niche issue. Goodstart Early Learning, a major not-for-profit provider, revealed in 2026 that while it received $13 million in ISP funding across its 700 centres, it was forced to contribute an additional $12.3 million from its own resources to meet the actual cost of care. CEO Ros Baxter stated that children with complex needs are "no longer a 'niche' group," and highlighted the broader economic crisis of children starting school behind developmentally. The base wage for a childcare worker at Goodstart is approximately $39 per hour—nearly double the ISP subsidy rate.

Advocates point to a stark disparity between education sectors. Caroline Croser-Barlow, CEO of The Front Project, notes that while the ISP funds support for up to 5% of children in childcare, Australian schools provide inclusion support to up to 20% of students. This indicates a significant gap in early intervention support.

Calls for Reform and Government Response

The call for urgent reform is growing. A 2023 Deloitte report commissioned by the government found that ISP demand was growing at 11% annually and that the diagnosis requirement was a major barrier. The 2024 Productivity Commission report on universal childcare recommended an immediate increase to inclusion subsidies. Industry figures argue that fixing the ISP is a prerequisite before implementing broader structural changes like a universal childcare system.

In response, the Minister for Early Childhood Education, Jess Walsh, has pointed to increased uptake, stating that around 26,000 children were supported by the ISP in 2024–25, compared to 15,800 in 2020-21. The government maintains its commitment to helping "as many children as possible" access mainstream early learning.

The Path Forward for Inclusive Childcare

Addressing this crisis requires a multi-faceted approach. First, the ISP funding rate must be significantly increased and indexed to wage growth to reflect the true cost of quality support. Second, the bureaucratic process needs streamlining to provide interim or provisional funding upon application, eliminating the months-long wait that excludes children when they need help most. Third, the requirement for a formal diagnosis should be reviewed to allow support based on observed need, aligning more closely with school-based inclusion models.

The stakes extend beyond individual children and families. As Ros Baxter warns, the failure to adequately support early childhood development represents "the biggest economic crisis that the country could imagine." Investing in a functional, properly funded inclusion system is not just a moral imperative for equity; it is a critical economic investment in Australia's future workforce and society. The current system, plagued by gaps and delays, is failing on both counts, demanding urgent and comprehensive reform.