Welcome to the forum! First of all, we love pictures, so show your little guy off!
Aussies (and honestly the majority of the herding breeds) can certainly be prone to reactivity (lunging, barking, growling, and generally just actin' a fool). It isn't uncommon and is arguably the most common complaint I get for clients.
What is a "training collar", like a cloth choke collar? If so I would HIGHLY recommend you stop correcting him. He is clearly nervous or afraid or both, and when you correct him (I'm assuming popping the leash with a stern no?) you're:
a) Not telling him what to do instead
b) Associating pain with the trigger (in his case kids)
c) Confirming to him that you don't have his back when the scary thing is around, so he has to be the defensive one.
Herding breeds in general can struggle around kids because they don't act like adults. They make strange noises and move in such unpredictable ways. I mean I don't get them either, and I'm an adult. :P
He may never LOVE children, but you can certainly work to get him to the point where he can tolerate them.
My Aussie loves just about everyone and everything, but kids make him nervous. They scream and run, so he tries to chase, and then they get upset and yell at him. As a result, he just prefers to hang with the adults or hide in his crate when children are around.
I'd suggest you find either a Positive Reinforcement trainer (CPDT List
) or a behaviourist.
This site (CARE
) will also be full of useful information for you.
As far as exercising, MENTAL stimulation is just as important, if not more than physical exercise. He's an Aussie, teach him all the things! Tricks, nose games, obedience, as much as you can think of. Personally my dogs LOVE hide and seek in my house (They're put in a down stay, I go hide and call them).
There's quite a few of us with Aussies on here, and lots of people with reactive dogs, so hang around and ask lots of questions.