Australia’s aged care, child care and disability services are increasingly run as businesses, but at what cost? GABRIELLE MEAGHER examines why the market model is failing those who depend on care.

Most of us use Australia’s care system in some way, or know someone who does. After all, from birth to death, we all need support at one time or another.

But as royal commissions into aged and disability care, and national scandals in child care have shown, this care isn’t always good quality. Sometimes it’s not available at all. At worst, it’s harmful.

One of the major drivers of these failures is the very business model of care itself. In Australia, as in many rich countries, private businesses are delivering an increasing share of care.

But it wasn’t always this way. So how did we get here, and how do we reform the system to better serve all of us?

From charities to profits

As the welfare state developed in rich countries after the second world war, governments took on some of the care for children, older people and people with disabilities that families, mutual aid associations and charities had provided.

The degree of government involvement varied across the world, and looked different in different countries. In the high-taxing Nordic countries, for example, local councils built up extensive public care systems, offering child care, nursing homes and home care.

In Australia, lower taxation rates and long periods of conservative government laid different foundations. Our constitution also shapes how care services are funded and regulated by prescribing different roles for federal and state governments.

After the war, Australian governments provided some care services themselves. But they also funded private organisations, mostly not-for-profits run by churches and charities, to deliver them.

In the 1970s, the Whitlam government funded community organisations to provide care services alongside established bodies.

Further change has happened since the 1980s. Demand for care services began to grow, driven by population ageing, increasing workforce participation by women and changing community expectations.

Influenced by the ideas of “new public management” (also called “economic rationalism” and “neoliberalism”), Australian governments mostly relied on funding external organisations to deliver care services, rather than expanding public services to meet growing demand.

They used private businesses and market mechanisms as models. Australian governments adopted this policy paradigm and what is now known as the “privatisation” and “marketisation” of care services took off.

A voucher for care

In the privatisation of care services, for example, the New South Wales government sold the Home Care Service of NSW in 2016. This public institution was established in 1943 and became the largest provider in Australia of care and support to older people and people with disabilities living at home.

But the most important policy changes are better understood as “marketisation” because they change how governments fund care services and what kinds of organisations deliver them across the board.

The dominant model for government funding across child care, aged care and disability support is now a kind of voucher. Policymakers hope this funding model will enable “customer choice” in a “market” of diverse providers who compete to offer services.

It works like this: when a person is eligible for a service, the federal government assigns them an amount of funding and the person (or their family) is left to find a provider to receive the funding and deliver the service.

In child care and aged care, people with incomes above certain levels are also expected to pay some of the cost themselves.

So how has this worked in practice?

‘The great and the ghastly’

Under the voucher-style funding model, for-profit providers have increased their share of provision across most types of care service.

The result is, according to political and social scientist Mark Considine, a “wide mix of the great and the ghastly” that tends to “a low-average model” revealed in many royal commissions and inquiries.

Problems are inherent in how care systems are set up. Governments leave much of the location, design and organisation of services to providers.

And because these services are in high demand, providers can be sure of a steady stream of government funding into the future.

When the share of for-profit operators grows, gaps in provision and quality problems emerge as under-resourced regulators struggle to monitor operators at arm’s length.

Child care services are an example, but the broad pattern is repeated across aged care and disability support.

The share of long day care centres operated by for-profit businesses increased from 62 per cent to 72 per cent between 2016 and 2026. Of new centres opened over the decade, 95 per cent are for-profit. Corporate chains have multiplied – 21 of the 25 largest long day care providers are operated for-profit.

On every measure of quality, including poor quality ratings and enforcement action for breaches of laws and regulations, for-profit providers are overrepresented compared to public and not-for-profit providers. Cost-cutting by large for-profits, especially on staff, drives many of these problems, while costs of care keep rising.

Providers use potential profitability to decide where to put centres because governments don’t plan the system. This leaves “child care deserts” around the country.

Buying and selling centres among for-profit operators is also big business. This creates “churn” that destabilises the sector.

Good care isn’t cheap

Many providers are working hard to deliver good care. But these problems arise because the market policy settings allow some providers to make business decisions to focus only on lucrative locations or that lead to poor quality.

And the costs of the long tail of poor private services are high, falling first on the people who are supposed to be being cared for.

The design of these care markets and the behaviour of bad providers also affects everyone in the system. All providers, both good and bad, get caught up in costly regulatory crackdowns and the loss of public confidence caused by bad performers.

Marketisation can lead to privatisation as trusted, high-quality public or community-based providers leave complex, fragmented and underfunded systems.

Governments are starting to address some of these problems. In early learning, the Building Early Education Fund was set up in 2024 to address the problem of child care deserts.

A raft of safety interventions was launched following the exposure of various catastrophic failings in child care in 2025 by the Australian government and state governments.

Recent legislative changes have made children’s safety, rights and best interests the “paramount consideration” in providers’ decision-making in early learning settings.

However, reforms that increase scrutiny by regulators and leave the rest of the “market” model intact will not work.

There are signs the iron grip that market ideology has had over Australian policymakers is starting to weaken.

It will take courage, time and money for governments to reorient care systems away from the market model towards what Considine calls a social model.

Under a social model, providers are connected to communities in an open, collaborative system and people who use services have a voice. Expertise from diverse sources – including clients, frontline workers, inspectors and researchers – is shared to drive innovation in the interests of clients.

Good care does not come cheap. Opportunistic corporate providers are deeply entrenched and commercial interests enjoy substantial protections. But Australians deserve better than the current arrangements.

Gabrielle Meagher, Professor Emerita, School of Society, Communication and Culture, Macquarie University. Republished from The Conversation.

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