Thousands of tamariki risk losing access to ECE as funding shortfall deepens

Thousands of families across New Zealand could lose their childcare options in the next 12 months as a gaping funding hole is making it harder for ECE providers to meet rising costs.

It follows the 2025 Budget’s 0.5 per cent cost adjustment, which falls far short of what is needed to cover government-mandated pay parity increases and escalating operational expenses.

Funding ECE has long been seen as a partnership between the government and parents. Budget 2025 effectively shifts the cost of government-mandated wage increases entirely onto families.

New industry analysis from the ECE Sector Partnership, incorporating the experiences of 500 early childhood education (ECE) providers, highlights the dire situation, with an average yearly shortfall of $41,000, and some grappling with forecast deficits as high as $167,000.

The analysis shows that a 3 per cent increase in parent fees would cover just 21 per cent of the shortfall.

Barnardos Aotearoa Chief Operating Officer, Heather Taylor, says many of the centres most at risk are in regional and low-income communities, where alternatives are limited or non-existent.

“For many centres, especially those serving vulnerable communities, raising fees is simply not an option,” Mrs Taylor says.

“Services with no or low fees, which often support New Zealand’s most at-risk children, rely on government subsidies for as much as 90 per cent of their income.

“At Barnardos Aotearoa, many of our children come from families living on limited or no income. They access ECE through our unique 30-hour no-charge model, which blends government funding with Barnardos’ own fee exemptions through our Barnardos fundraising efforts.

“It’s how we work to remove barriers and ensure every child can access quality early learning, regardless of their background. Increasing these fees is not an option for us, as these tamariki would miss out on accessing education,” she says.

Kathy Wolfe, CEO of Te Rito Maioha, says a centre the organisation recently supported with pay parity decisions “is in shortfall and will need to increase parent fees by up to 20 per cent to stay afloat.”

New Zealand Kindergartens’ CEO, Jill Bond, says the ECE sector fully supports pay parity and recognises the need for regulatory improvement and financial discipline.

However, she says the unintended consequences of Budget 2025 risk long-term damage to the ECE system and wider economy.

“Every child deserves equal access to education. Without intervention, the consequences will be severe and wide-reaching, from reduced child participation, record centre closures and loss of workforce participation, to teacher attrition and disruption for families.

“Action must be taken now to avoid eroding decades of investment in early learning, with long-term impacts on education, equity, and economic productivity.”

In an urgent effort to help fill the gap, the ECE Sector Partnership has identified a potential solution to bridge the gap - redirecting the expected underspend from the Government’s Family Boost programme to the ECE sector.

Montessori Aotearoa New Zealand Chief Executive, Cathy Wilson, says the funding redirect would help keep centres open, stabilise fees for families, and prevent widespread closures, bridging the gap as longer-term funding solutions are developed through the reviews that are underway.

“If the Government does not act, up to 400 centres could shut their doors, leaving families without options and children without access to quality early learning,” Ms Wilson says.

“We urge the Government to address this funding mismatch until the Funding Review is complete and the fundamental costs and funding mechanisms can be thoroughly explored.”

The ECE Sector Partnership represents nearly 60 per cent of the ECE sector. The group has come together to advocate for a better operating environment for tamariki, whānau, staff and providers.