The profiteers plundering child care
Twenty years ago, Eddy Groves blazed a trail as the first of Australia’s childcare industry capitalists to make the annual Rich List. As Groves’ portfolio of childcare centres ballooned, so did his personal wealth—from a hundred childcare centres and $40 million in 2002, to a thousand childcare centres in Australia, a similar number overseas, and a fortune of $260 million in 2006. By this stage, Groves owned a ranch in Nevada, a house in France and the Brisbane Bullets basketball team.
Groves’ empire collapsed in 2008. But he had proved in practice that it was possible for cashed-up operators to make a fortune in care industries governments were retreating from. So long as there is a steady flow of government money, rapid expansion of the corporate footprint, poorly enforced regulation and a ruthless, cost-cutting approach to staffing and conditions, there is money to be made.
Just look at Pejman Okhovat, the CEO of G8 Education. His total remuneration was $3.3 million in 2024, up from $3 million the year before. G8 Education is the biggest childcare provider in Victoria, with 130 centres across the state. An investigation by the Age following a major alleged child abuse scandal reveals a chronic shortage of trained staff in multiple centres and a failure to report incidents in which a child was harmed or at risk of serious harm: “One mother said she believed it was ‘painfully obvious’ the childcare giant prioritised its reputation over providing adequate care”.
Child care today is highly profitable. The public financial advice website Finexia claims that a profit margin of 10 to 20 percent is typical—which is significantly more than Woolworths’ reported profit rate of around 6 percent of sales.
But the big money comes from accumulating the centres themselves, which ensures larger streams of government cash. News.com carried a story in March this year profiling just a few of the characters who have enriched themselves in this way. The list includes Brendan McAssey, who sold off his “Only About Children” childcare chain to private equity company Bain Capital in 2016 for $400 million. The deal set him up for a $22.5 million luxury home at Noosa and (according a report from the United Workers Union in 2018) a “44 metre superyacht, helicopter, private jet and $17 million mansion at Balmoral Beach on Sydney Harbour”.
Vijay and Phyllis Narula sold their 14-centre Little People’s Places childcare business for $40 million in 2021. This cash funds what news.com describes as their “opulent lifestyle played out online with pictures of their beachfront mansion, Lamborghinis, and first-class global travels, regularly updated on social media”.
Adrian Fonseca already owned a $14 million mansion in Sydney’s eastern suburbs. Selling his 12 childcare centres to Affinity in 2022 for around $40 million no doubt helped him find the $15.6 million needed for the mansion next door in 2023.
We could continue the list, but even this is all chickenfeed. The big players in the industry aren’t motivated by luxury lifestyles, though they no doubt enjoy them. The real game is capital accumulation, on a spectacular scale.
This is enabled by steady government money and a regulator uninterested in creating barriers to private enrichment. In 2016, the model was attractive enough to entice private equity firm Anchorage to buy Affinity Education, one of Australia’s biggest childcare operators, for $210 million. Anchorage achieved an extraordinary return on this investment, tripling their money in just five years by selling Affinity off to Quadrant, another Sydney private equity company, for $650 million in 2021.
The executives at incoming owners Quadrant were then faced with the task of squeezing even more money out of Affinity Education. The plan seems to have been a simple one: load up on debt, crack down on costs, expand the corporate footprint by buying up more centres—and then cash in.
The ABC’s reporting shows that breaches of mandated legal minimums on staffing—and intense pressure on staff to leave regulatory breaches unreported—are part and parcel of this business model.. Loretta Dodwell was one of the childcare workers who spoke to the ABC in May about what she’d seen while employed by Affinity Education. “The cost cutting and the lack of staff really caused serious incidents in the centre”, she said. “They were also putting on lots of trainees, like young trainees that were cheap to employ and that put a lot of pressure on the qualified staff ... They [Affinity] are just not suitable to be in the childcare industry because they are just so greedy ... They cut staff, they put the staff under so much pressure ... they’re just a big company that wants to make money out of children.”
The head of this “big company that wants to make money out of children” is Chris Hadley, the executive chairman of Affinity Education’s current owner, the private equity firm Quadrant. Hadley is a legend in Sydney money circles. He’s probably a billionaire, although, as the Australian Financial Review reported in 2023, Quadrant’s “labyrinthine corporate structure” makes it impossible to be certain.
For the workers, it is a different story. “Food or rent. I can’t afford both.” This is how one member of the United Workers Union responded to a union survey of early childhood educators last year. Others reported working a second job, not being able to afford essentials, or not being able to afford a holiday with their kids.
This is the reality of caring being left to the market. Capitalism has always seen care as a high fixed cost that generates no direct profit, and that therefore should generally be cut to the minimum. This counts double for those too old to make a profit for a boss, or too young, or with a disability that makes someone less profitable to employ. So even before our current neoliberal age with its mania for privatisation, aged care, childcare and other community care facilities were often overcrowded institutions with underpaid and overworked staff.
But it’s also true that all of these problems have become dramatically worse as the Chris Hadleys and their ilk moved in. Instead of local councils providing the bulk of aged care and child care, with some basic level of political and legal accountability, the profiteering wannabe billionaires (and actual billionaires) are interested only in making a buck.
Tripling your corporation’s wealth, as Anchorage private equity did with Affinity child care in five years, and as Quadrant hope to do, is the highest mission for any capitalist. More than a hundred and fifty years ago, Karl Marx explored the desperation of capitalists to multiply their capital in volume one of Capital, quoting the British trade unionist Thomas Dunning: “With adequate profit, capital is very bold. A certain ten percent will ensure its employment anywhere; twenty percent certain will produce eagerness; fifty percent positive audacity; hundred percent will make it ready to trample on all human laws; three hundred percent, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged”.
The quote sums up the ethos of capital perfectly. The only difference today is that there’s no chance of any of the childcare profiteers being hanged for their crimes. In fact, it’s an absolute rarity for any of them even to be prosecuted, let alone convicted. Modern day neoliberal “regulators”, in child care and anywhere else, are generally no impediment at all to companies systematically breaching the regulations in pursuit of profit.
So back in the day, Eddy Groves walked free despite leaving over $1 billion in bad debt. And 20 years later, Affinity look to be following in his footsteps. Adele Ferguson and Chris Gillet reported on the ABC in May this year that, despite constant pressure on staff not to report regulatory breaches, between 2021 and 2024 Affinity childcare centres “were hit with more than 1,700 regulatory breaches, averaging more than one a day” in New South Wales alone. “Despite this”, Jones and Gillet reported, “the NSW regulator issued just nine infringement notices, totalling less than $2,000 in penalties.”
Labor’s reforms, at best, tinker at the edges of this grotesque system—a system that they’ve helped to create since the 1990s, and which they have no interest in transforming.
In the wake of Eddie Groves’ spectacular implosion, academic and gender equity advocate Deborah Brennan outlined Labor’s track record on child care, writing in the Sydney Morning Herald: “How did we get into this mess? Deputy Prime Minister Julia Gillard has blamed John Howard for ‘letting the market rip’, but it was the Hawke government, in 1991, that introduced market forces into the sector. It did this by extending child-care assistance to the users of for-profit care and then by changing the structure of Commonwealth funding to encourage private provision and marginalise the community sector ... The Howard government intensified Labor's market focus, ending operational subsidies to community-based care in 1997”.
This whole architecture needs to be scrapped. ABC investigations are important, but far from sufficient to drive this level of change. In aged care, for instance, there have been incremental improvements to wages and staffing since the royal commission triggered by a shocking 2018 Four Corners investigation. However, the fundamental structure of the industry remains untouched and, with it, many of the problems.
For more far-reaching reforms, the crisis in child care will have to be transformed into a political crisis for the government and the profiteers. The actions of workers in the sector—which we saw a glimpse of in the Big Steps campaign of walk-offs and protests organised by the UWU—can be crucial in this.
We should be fighting for a society that puts human dignity first—in early childhood education, disability, aged care and far beyond—and relegates the profiteers, their Lamborghinis and their obscene, dog-eat-dog system to history.
