The NSW government has proposed a policy to streamline the planning process and make it easier for childcare providers and developers to build new facilities and improve existing ones.

ACA NSW president Lyn Connolly said she welcomed initiatives to improve application processing times, but said it could accelerate what was already an “oversupply” of places at some long daycare centres across Newcastle, Lake Macquarie and Maitland. “Occupancy levels at the moment are at an average of less than 80 per cent for greater Newcastle,” Ms Connolly said. “This is setting people up to fail.”

ACA figures show Newcastle needs an extra 1003 places by 2031, but is expected to have 1852 new places by 2020. Lake Macquarie needs an extra 457 places by 2031 but is expected to have 1186 by 2020. Maitland needs an extra 1057 places but is expected to have 760 by 2020.

Ms Connolly said the policy could lead to operators including large corporations, the unaware and unscrupulous flooding the market, which could mean lower quality care, force centres to fold and disrupt families.

The ACA submission to NSW Planning has called for changes that would require centres to demonstrate an appropriate level of demand for their services and adhere to a minimum distance from other facilities.

Newcastle City Council declined to comment and a spokesman for Maitland City Council said it “cannot verify the figures about the local childcare market, both supply and demand, as it is a self regulating industry”. A Lake Macquarie City Council spokeswoman said the policy “was not designed to regulate competition”.

Ms Connolly said regulation meant it wasn’t straight forward for existing centres to become more competitive. “We can’t have a larger group of children [assigned] to the teachers we’ve got, or increase class sizes.”

She said the ACA also wanted the federal government to introduce a planning system to decide where centres could open, similar to rules for aged care services.

Centres told the Herald that even if oversupply wasn’t a current problem, it was a future possibility.

Diocese of Maitland-Newcastle’s vice chancellor administration Sean Scanlon said the St Nicholas Early Education centres in Newcastle West and Singleton were operating at or near full capacity. “While the risk of oversupply is certainly a concern, especially with a high degree of speculative investment in the sector, this is not something which will prevent St Nicholas from continuing to expand in the region where there is an identified need for quality early education services,” he said. Samaritans community services manager Julie Pearson said 2017 was the first year the charity had to advertise places at its Newcastle and Woodberry centres.

The government’s proposed policy includes allowing certain facilities to be assessed as exempt or complying developments and amending local environmental plans to permit centre-based childcare in all low density residential and light industrial zones. Most facilities are defined as centre-based childcare, which will still need to be assessed through the local development process.