A draft report on the childcare and early childhood learning sector has been released by the Productivity Commission and is seeking public comment on a range of changes to improve the childcare system and make it more affordable, flexible and accessible to families.

Presiding Commissioner, Dr Wendy Craik, said the review has been prompted by concerns the current system is not meeting the needs of all families and the cost to taxpayers is increasing at an unsustainable rate with the government currently funding early childhood education and care to the tune of $7 billion.

Regional childcare providers however, are concerned proposed changes restricting access to the Special Child Care Benefit (SCCB) to vulnerable families, will greatly disadvantage the availability of child care services to those who need it most.

Among Mid North Coast childcare providers attending this week's Productivity Commission hearing was Marg Brien, director of Goodstart Early Learning in Taree - a region, according to the latest Australian Bureau of Statistics socio-economic index rating, is ranked in the bottom 20 per cent of communities by income.

"My philosophy has always included providing access to high quality early childhood programs for all children, particularly the most vulnerable," Ms Brien said.

"It is very close to my heart because most of the children at my centre are starting out life facing some particular challenges or vulnerabilities."

Ms Brien said proposals in the draft report to restrict access to the SCCB only to children who have been issued a case manager will result in vulnerable children, who would normally benefit from the safe and nurturing environment of a child care centre, to fall under the radar.

"It is not easy dealing with these families. They may be vulnerable but not meet the department's priorities for case management. One of the advantages of the current SCCB system is that families who are vulnerable can access care without being judged," Ms Brien said.

"That can provide a soft entry point to the child protection regime, allowing educators to closely observe the child and determine if a referral to child protection is warranted.

"These are matters of judgement, made in each families' circumstance, in the child's interests."

Ms Brien said under the proposed changes all discretion is removed and the vital role early childhood centres play in the lives of vulnerable children will be lost.

The draft Childcare and Early Childhood Learning report will continue to seek feedback before being finalised at the end of October.

Dr Craik said it was clear from the Commission's research that childcare and early childhood learning plays a vital role in both child development and workforce participation.

The report proposes three key areas of funding for mainstream childcare services; children with disabilities and additional needs; and preschool.

"Some of our key recommendations include replacing the current multiple childcare subsidies with a single subsidy that would be paid directly to the parents' choice of provider, and be means and activity tested. The subsidy would be based on a set reasonable cost of care," Dr Craik said.

The recommendations for means testing a single childcare rebate would still see all eligible families receiving a minimum of 30% of their reasonable childcare fees reimbursed by taxpayers. Further options for assistance however remain under consideration.

"Means-testing the childcare rebate will mean that more families on very low incomes will pay less for their childcare than they do now. We expect low income families would see around 90% of their reasonable childcare fees paid by government,'" Dr Craik said.

The Commission is inviting submissions on the draft report until September 5.