RMIT University research published on Friday reveals the industry remains under pressure due to a significant drop in investment paired with rising production costs.
The sector has helped shape culture for decades through programs such as H2O: Just Add Water, Round the Twist, Blinky Bill, and more recently, Bluey, launched in 2018.
Lead author Jessica Balanzategui believes screen policy settings are failing to support the local stories young audiences need.
"Commercial broadcasters have retreated, streamers are not commissioning new children's programs, and public institutions are being left to carry an increasingly heavy load," she said.
The report reveals there has been a 97 per cent drop in commercial children's television investment since a 2020 decision to remove commercial quotas.
Production costs are also leading to significant strain, with the average cost of producing live-action children's drama tripling over five years to $2.82 million an hour, while the volume of new first-release programming has fallen.
Despite increased commissioning investment, the ABC's first-release children's hours have fallen by 59 per cent since 2019, the report found.
Associate Professor Balanzategui said children aged 10 to 14 were under-served by local screen content, with fewer programs being made for an audience already drifting towards global streaming services.
"(It's) a particularly difficult audience to retain, with changing viewing habits, rising production costs and weak commissioning pathways all contributing to a shortage of new Australian content for this age group," she said.
Australian television was once a booming industry, launching the careers of Chris Hemsworth in The Saddle Club, Phoebe Tonkin and Claire Holt in H2O: Just Add Water, and Ryan Corr in The Sleepover Club.
Beyond producing future Hollywood stars, the industry also had a significant cultural impact on young people.
"Over many years research has demonstrated how local children's television scaffolds children's participation in multicultural child citizenship and social cohesion," Assoc Prof Balanzategui said.
But if we want young people to stay connected to local stories, children and tweens need sustained investment in the sector and local content they can actually find."
The report calls for screen reforms to deliver clear obligations, investment, and stronger viewership for local content for children and teens.
To safeguard the industry, researchers believe policymakers should review streaming services' local content rules to decide whether demographic-specific sub-quotas are needed.
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