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Business Environment Profiles - New Zealand

Public funding for early childhood education

Published: 29 April 2024

Key Metrics

Public funding for early childhood education

Total (2024)

3 $ billion

Annualized Growth 2019-24

7.1 %

Definition of Public funding for early childhood education

This report analyses government funding for early childhood education, which can be delivered by a variety of licenced providers, including kindergartens, playcentres, Te Kura (the Correspondence School) and special needs services. Day care and child care services are not included. The data for this report is sourced from the Treasury (Te Tai Ohanga) and the Ministry of Education (Te Tahuhu o te Matauranga) and is measured in billions of dollars per financial year.

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Recent Trends – Public funding for early childhood education

IBISWorld forecasts public funding for early childhood education to rise by 12.3% in 2024-25, to reach $3.01 billion. Funding growth in the current year is expected to be driven by greater numbers of children attending Early Childhood Education (ECE), lifting the number of places eligible for government funding. Additionally, the 2023 Budget allocated a significant increase in ECE funding to extend the 20 hours of free early childhood education to 2-year-olds. The increased funding also includes higher salaries for staff working in ECE.

Attendance at ECE is not compulsory, but is available for children from birth to school entry age. The Central Government (Te Kawanatanga o Aotearoa) subsidises attendance primarily through the ECE Funding subsidy, the 20 Hours ECE and the Equity Funding programs. Through the ECE Funding subsidy, the Central Government finances ECE for all children for up to six hours per day, to a total of 30 hours per week. The 20 Hours ECE Funding policy is a higher rate of government subsidy, covering two to five-year-olds for up to a maximum of six hours per child per day, to a maximum of 20 hours per week per child. Equity Funding is designed to improve access to ECE in specific communities by delivering additional funding to eligible operators. For a community, the extent of isolation, the level of socio-economic achievement and the number of children with special needs and from non-English speaking backgrounds determine eligibility and the amount of Equity Funding a provider in the community receives. As of December 2023 (latest available data), 95.6% of New Zealand children attended ECE.

Over the past five years, the level of funding for the Equity Funding policy has risen strongly, boosting overall public funding for ECE. Marginal growth in the population aged 14 and younger has also expanded the pool of potential ECE students over the period, lifting the number of subsidised places and supporting rising public expenditure. The New Zealand Government's 2020 budget earmarked an additional $278 million in ECE spending for preschools which only employ fully qualified teaching staff, while funding has been growing steeply since. Overall, IBISWorld forecasts public funding for early childhood education to increase at a compound annual rate of 8.4% over the five years through 2024-25.

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5-Year Outlook – Public funding for early childhood education

IBISWorld forecasts public funding for early childhood education to rise by 1.7% in 2025-26, to r...

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