This study aimed to elucidate the nature of the relationship between the development of decoding and encoding skills in the first year at school. The foundational literacy skills of one hundred eighty 5-year-old children were examined on three occasions over their first year of literacy instruction. Participants received the same literacy curriculum. The predictive utility of early spelling on later reading accuracy, reading comprehension, and spelling outcomes was explored. Performance on matched nonword spelling and nonword reading tasks was also used to compare the use of particular graphemes across these contexts. Regression and path analyses showed that nonword spelling was a unique predictor of later (end of year) reading and played a facilitative role in the emergence of decoding. Children were generally more accurate on spelling than decoding for the majority of graphemes evaluated in the matched tasks. Factors such as position of the grapheme in the word, complexity of the grapheme (e.g., digraph vs. graph), and the scope and sequence of the literacy curriculum influenced children's accuracy for specific graphemes. The development of phonological spelling appears to play a facilitatory role in early literacy acquisition. Implications for the assessment and teaching of spelling in the first year of schooling are explored.
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