A proposed overhaul of the nation's childcare system has been labelled "a step in the right direction" by Illawarra childcare workers, despite concerns some changes could cause industry standards to slip.
Sector representatives have praised moves to means-test the childcare rebate and increase funding for children with additional needs, after the Productivity Commission released its draft report on Tuesday.
"Overall, I think the report is positive," Keiraville Community Preschool director Margaret Gleeson said.
"Its focus on addressing cost issues faced by low-income families and the rights of children with additional needs to receive an early childhood education - those are really positive things.
"What they're proposing in the report won't fix the current situation in NSW but it is a step in the right direction."
Under the proposed changes, government childcare payments would be streamlined into a single means-tested subsidy paid directly to the provider.
Families earning less than $60,000 annually would have 90 per cent of the cost of childcare covered, while families at the other end of the scale who earn $300,000 or more, would have 30 per cent covered.
A top-up subsidy would be paid to providers to cover service costs for children with additional needs.
The report, which aims to make childcare more affordable, flexible and accessible, also recommends the government extend subsidies to include nannies and home carers who hold a certificate III in early childhood education.
"This is a great step and it's long overdue," South Coast Nannies founder Melinda Robertson said. "Having a nanny is not just for the rich but ... providing a subsidy will make it more affordable for parents, for shift workers or single parents who might need an alternative to formal childcare."
But it was not all good news.
Community Child Care Co-operative (NSW) chief executive Leanne Gibbs said some of the report's recommendations were concerning, particularly changes to staff-to-child ratios that could lower the state's high standard. Other concerns included not-for-profit providers being stripped of their tax benefits and exemptions, preschools being removed from the national quality framework and a move to encourage the state government to provide preschools within schools.
Bill Feld, chief executive of Illawarra non-profit childcare organisation Big Fat Smile, reserved comment until he had reviewed the lengthy report.
Illawarra Area Child Care chief executive Jan Langtry was unavailable for comment.
Sign up for our newsletter to stay up to date.