Big child care in trouble, forcing Oz to rethink funding policies

Community Action, March 20, 2008

Australia's new Labour government faces a renewed challenge over the issue of government funding of privately owned child care centres. Until now, Labour has been reluctant to change the policies of the previous government, that encouraged privatization of social programs.

However, the financial difficulties of Australia's child care mega corporation, ABC Learning Child Care Centres, have created a problem for the government.

The company, which operates nearly 2,000 day care centres in Australia, announced a 42% drop in profits for the last half of 2007. Debtors who financed the expansion of the company are pressing for early payment.

Meanwhile, the value of ABC stocks dropped sharply, threatening the stability of the company.

The Australian federal government subsidizes 30% of the costs of these centres. Now it is concerned, and has indicated, that it will not allow any of the centres to shut down. The government also plans to increase tax rebates to parents by 50%, which will enable child care centres to raise their fees.

ABC recently persuaded the British Columbia government to allow public funding for privately owned child care facilities in the province. Most Canadian provinces allow public funds only for public and non-profit centres. In recent months, the company has made offers to privately owned child care centres in BC and Ontario.

ABC Learning grew and expanded' rapidly since the 1980s. It runs 30% of Australia's child-care centres and has more than 100 centres in the United Kingdom and New Zealand.

In the United States, ABC centres have been growing rapidly through the outright purchases and partnerships of more than 1,000 facilities. The corporation announced plans to sell most of its centres outside Australia to pay the debt obligations incurred over the years.

The Australian Securities and Investment Commission is looking into the financial structure of the company and personal dealings with ABC's founder,