NSW Government responds to ECEC Inquiry, setting direction for next phase of sector reform

More unannounced regulatory visits, increased scrutiny of provider expansion, stronger workforce safeguards and significant changes to preschool funding are among the priorities outlined in the NSW Government’s formal response to the parliamentary inquiry into early childhood education and care.

The NSW Government has released its response to the parliamentary inquiry into the early childhood education and care (ECEC) sector, providing further clarity on the direction of reform across child safety, regulation, workforce, inclusion, funding and provider accountability.

The inquiry, established in March 2025, examined a broad range of issues affecting ECEC in NSW, including the safety and wellbeing of children, service quality, workforce conditions, regulatory oversight, transparency, funding and inclusion.

Its final report was tabled on 20 May 2026 following four public hearings and extensive evidence from across the sector.

The Government's response, received on 20 August, addresses the Committee's 35 recommendations, supporting or supporting in principle many of them while noting or rejecting others.

Together, the responses provide an important indication of what NSW providers can expect as the state's ECEC reform agenda continues.

One of the clearest signals for providers is that increased regulatory visibility is here to stay.

The Government supported the Committee's recommendation for significantly more unannounced spot checks, pointing to its $55 million investment over four years in the NSW Early Learning Commission to increase frontline regulatory personnel.

During the first three quarters of 2025-26, the regulator conducted 7,237 visits to services, 65 per cent of which were unannounced.

With additional regulatory staff being recruited, the Government said the number of visits, including unannounced visits, is expected to increase over the next 12 months.

The Commission has also expanded its use of targeted statewide compliance campaigns alongside routine monitoring.

For services, the direction is significant. Regulatory oversight is increasingly focused on what occurs during ordinary operations, rather than only what can be demonstrated during a scheduled visit.

The Government has also supported a review of the Assessment and Rating (A&R) process aimed at improving consistency and measurability and strengthening safeguards against manipulation of the process.

The NSW Early Learning Commission has already reduced notice periods for A&R visits and increased the use of partial reassessments.

NSW services are currently assessed and rated on average every 2.3 years, while services rated Working Towards are reassessed more frequently, averaging 1.4 years between ratings.

The Government supported in principle the recommendation that every service be assessed and rated at least once every three years, noting national agreement towards an average three-year cycle with more frequent assessments for services rated Working Towards.

The Committee recommended preventing providers from opening new services where they already operate a service rated Working Towards or lower.

The Government supported the recommendation in principle, but stopped short of accepting a Working Towards rating as an automatic barrier to expansion.

Instead, the NSW Early Learning Commission will continue using a risk-based approach when considering applications and transfers, including examining providers' compliance histories and the ratings of their existing services.

Significantly, the Government confirmed the Commission already has powers to prevent providers from opening new services where risks are identified and that those powers have been exercised.

The position reinforces an important consideration for expanding providers: applications for new services will increasingly be considered in the context of the organisation's broader quality, governance and compliance performance.

The Government rejected the Committee's recommendation that internal risk ratings assigned to individual ECEC services be made publicly available.

It said the ratings are regulatory intelligence used to prioritise activity and do not necessarily represent findings of proven misconduct or non-compliance.

Publishing them could unfairly affect services where a rating reflects potential rather than substantiated risk and could undermine unannounced regulatory activity by allowing providers to anticipate increased scrutiny.

However, other transparency measures have been strengthened, including requirements around the publication of compliance and quality history and provider ownership information.

The response also confirms a significant change for NSW community preschools.

From 1 January 2027, Start Strong for Community Preschools will be replaced by the new Universal Preschool Funding program.

The Government said the new model will fully fund operating costs for three and four-year-old children in eligible not-for-profit preschools based on appropriate staffing levels, regulatory ratios, industrial award rates and other costs associated with delivering safe and inclusive early learning.

The model is intended to enable participating not-for-profit preschools to operate fee-free or at low cost and will include a mandatory pay increase for early childhood staff from 2027.

The response also points to other workforce and sector investments, including scholarships, Diploma-to-Degree pathways and funding designed to increase access to quality ECEC.

Workforce shortages remain a significant challenge, but the response makes clear that workforce pressures are not expected to override child safety requirements.

The Government supported in principle the recommendation that staffing waivers be used only as a last resort and for limited periods.

It also supported a 'zero tolerance' approach to penalties where ratio breaches have resulted in, or could reasonably result in, harm to children.

The Government pointed to the National Early Childhood Worker Register, which entered its foundational stage in February 2026, as another important component of strengthened workforce safeguards.

NSW will continue working with other jurisdictions, ACECQA and the Australian Government on future stages of the Register.

One of the Committee's more significant recommendations was that at least two staff members should remain in line of sight of each other whenever interacting with children.

The Government noted, rather than supported, the recommendation.

It pointed instead to national work underway following ACECQA's Rapid Review into Child Safe Practices, including consideration of reforms to strengthen supervision requirements and improve consistency across jurisdictions.

This means the recommendation has not translated into a new NSW requirement at this stage, although supervision and child safety practice remain firmly within the broader national reform agenda.

The Government supported in principle recommendations aimed at strengthening inclusion and preventing children with disability or additional needs from being excluded because of those needs.

Reforms to the NSW Disability and Inclusion Program are underway, with the Government indicating an intention to provide greater and more tailored support.

Existing measures include Higher Learning Support Needs funding, the Sector Capacity Building Program, Integration Funding Support in public preschools and early intervention support classes.

The response reinforces the expectation that inclusion is not simply about providing additional staffing but ensuring services have the capability, environments and systems necessary to support children's meaningful participation.

Taken together, the Government's response points to an ECEC regulatory environment in which visibility, accountability and organisational governance will become increasingly important.

Providers can expect more frequent regulatory contact, greater use of unannounced visits, closer consideration of organisational compliance histories and continued scrutiny of whether governance systems translate into safe practice at service level.

At the same time, reforms to preschool funding, inclusion and workforce development demonstrate that the Government's response is not solely about stronger enforcement.

It reflects a broader attempt to reshape how ECEC is funded, regulated and supported across NSW.

Perhaps the clearest indication of what this means for services is contained in the regulator's own activity.

With 65 per cent of 7,237 regulatory visits during the first three quarters of 2025-26 conducted unannounced, services increasingly need to be ready to demonstrate quality, safety and compliance on any day, not simply when an Assessment and Rating visit is approaching.

For approved providers, boards, executives and service leaders, that shifts the conversation from being prepared for the regulator to ensuring strong governance, child safety and quality practice are embedded in everyday operations.

And as NSW moves into the next phase of ECEC reform, that distinction is likely to become increasingly important.

Read the NSW Government's response and the full ECEC Inquiry report here.