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Private childcare operators in NSW will be pushed to compete for funds to create thousands of new places where they are most needed.
Likely the centrepiece policy of Treasurer Matt Kean's first budget and described as "an absolute game changer", it aims to address a lack of accessible and affordable child care Mr Kean says is "a huge barrier to women participating in the economy".
The state will spend $775 million over four years, but could spend up to $5 billion over the decade, dependent on inflation and future advice.
Mr Kean suggested an independent body, potentially the Independent Pricing and Regulatory Tribunal, would decide on future funding, capped at $650 million annually.
He announced the funding at a briefing hosted by urban policy think tank Committee for Sydney on Tuesday, a week out from the budget on June 21.
It's the final budget before the March 2023 state election.
The policy is projected to create an additional 47,000 childcare places annually, eventually saving families $3900 a year per child.
Opposition Leader Chris Minns said the announcement contained huge promises and called on the government to explain how directing money to the private sector will drive down prices.
Parents of young children were unlikely to benefit from the policy as most of the funding does not come for at least another four years.
"They might have long term plans, but we need to worry about the family budget over the next month, the next six months and the next year," Mr Minns said.
Premier Dominic Perrottet said the policy was a once-in-a-generation reform that needed a long-term view to drive women's participation in the workforce for the next decade.
"We need to make sure we have a long term horizon ... this is the biggest productivity reform the state can pursue," the premier said.
The money establishes a fund for childcare operators looking to expand and complements subsidies from the federal government, Mr Kean said.
Operators will compete through an auction process to provide more places at affordable prices.
"If they want to propose ways that they're going to significantly decrease the cost of delivering care then they can compete for this money," he said.
He hopes to push the market to provide affordable places in areas crying out for childcare, rather than operators simply expanding where they can increase profit.
The program is estimated to grow the economy by more than $17 billion annually.
"NSW has some of the most highly educated women anywhere on the planet," he said.
"Unleashing that creative, professional capacity will drive economic growth."
Mr Kean said some women wanting to return to work struggled to find childcare, or found it so expensive it was barely worthwhile, describing it as a women's tax on aspiration.
Women's workforce participation was lower than men's, their work less secure and lower paid, and women were more likely to be harassed at work.
"(These circumstances) are the result of divisive barriers that prevent women from having true freedom of choice over their lives," Mr Kean said.
In addition to the fund, some $281 million will go towards scholarships and training grants of up to $25,000 to support the staff required for an expanding sector, with plans to add another 18,000 childcare workers.
Early Learning Minister Sarah Mitchell said it was the biggest investment the state has made in childcare staff, 95 per cent of whom are women.
"This is a landmark day for NSW," she said.
Opposition early learning spokeswoman Prue Car said the policy is "smoke and mirrors" and its benefits won't arrive for years.
"This is just a political announcement on the eve of an election that will not benefit anyone who is struggling with childcare centres, places and fees right now," she said.
Women have been a focus of Mr Kean's first budget with other announcements so far including funding for menopause treatment, women's return to work grants and creating more women's community centres and refuges.