Interview on 2GB with Michael McLaren
Topics: Cost of child care and the Turnbull Government’s new child care package



Michael McLaren:        Well, stories around everywhere today about cost of living pressures, but look, I guess most of you don’t need the newspapers to tell you that the price of a bunch of essential services has really gone through the roof over the past few years. That is despite inflation running at a very flat heartbeat. But the Fin Review suggests the start of the 2018 political season is going to see the PM and Opposition Leader go head to head over the issue of cost of living, with Malcolm Turnbull apparently ready to spruik some recently announced changes to child care subsidies as central to easing tight family budgets.

Well, he’s going to have to, because when you look at the list of things bleeding peoples’ wallets dry, aside from energy prices and mortgages, it’s child care that stands out big time. The latest ABS household expenditure survey shows a whopping 99 per cent increase in child care costs since the year 2000 – 99 per cent. Now, compare that to doctors’ fees up 27 per cent, and gas prices up 35 per cent during the same timeframe, you get a bit of an idea just how high child care fees have gone, or just how quickly they’ve grown.

Now, look, I’m yet to join the ranks of the long-suffering parents with the child in the child care system, but I’ll get there one day. But look, I’ll tell you what, I’ve got no idea how people pay for this. Many working mothers often wonder why they go back to work, because by the time they’ve earned the money to pay for the child care, which you’ve got to have if you’re going back to work, there’s nothing left to actually put in the bank – why bother?

Now, look, if you ask me, the child care system is broken. It stands out as an example of a sector defying the natural forces of free-market economics, with competition – and a guaranteed clientele, let’s not forget – failing to put downward pressure on prices. Now, the costs are completely outrageous and way out of proportion to the service that seems to be delivered, and a lot of the blame lies at the feet, it has to be said, of the former Labor Government, whose policies – and there’s a few we’ll get to in a sec – strongly drove up fees.

Well, look, the current Education Minister is Simon Birmingham. Lucky Simon, he’s inherited the mess. He’s on the line. Minister, good to have you there.

Simon Birmingham:    G’day, Michael. Great to be with you.

Michael McLaren:        Thank you. Look, I look at the costs of this child care thing – long day child care or what have you – and it’s akin to private school fees for a year 7 child. I mean, it’s ridiculous. Some people are paying, I was reading when I was preparing for this discussion, nearly $24,000 a year. In fact, it would be $31,000-$32,0000 a year for four days a week if it weren’t for the government rebate. I mean, it’s ridiculous.

Simon Birmingham:    Look, indeed, Michael, and there’s no doubt that child care fees have grown too fast over recent years. In particular, we saw significant rates of fee growth during the time the Labor Party was in government. We’ve managed to stem that rate of growth. It peaked at around 14.5 per cent back in 2009. We’ve stemmed that now to rates of growth that are a smidge under 4 per cent overall in terms of the child care sector, but we still need to do more, and that’s why what we legislated last year – and it comes into effect in July this year – is some very significant changes to the way that child care subsidies will work in Australia, including measures that we hope will constrain fee growth in the future and certainly make child care services much more accountable for their fee growth.

Michael McLaren:        Have we seen an end to the days where couples on $350,000-plus were still getting a rebate?

Simon Birmingham:    That’s one of the changes. So, what we’ve really done is we’ve said we’re going to reprioritise who gets child care subsidies. So, yes, very high-income-earning families will see a reduction, or indeed an end, to their access to child care subsidies.

Michael McLaren:        What’s the cap, by the way, for that?

Simon Birmingham:    It is, indeed, $350,000 is where it cuts out. It phases out. So, many families between $250,000 and $350,000 will see a reduction in the support they get before, then, you have that total end point. However, we’ve also said that really what taxpayers rightly expect when they’re supporting the costs of child care for families, is that these are families who need it, that they’re working, they’re studying, they’re engaging in …

Michael McLaren:        It’s means-tested, yeah?

Simon Birmingham:    That’s right. So, we’ve put an activity test in place that will come in from July this year as well, that ensures people have to be engaging in those sorts of activities, and the number of hours of subsidy they’re entitled to aligns with the work that’s happening in that family and their engagement. And by doing all of that, and by putting a bit of extra support behind it in a budget sense, we’re able to provide greater relief to low and middle-income families who are working the longest hours but earning the least amount of money, to make sure that child care costs are no longer an impediment to them working the hours and days they want to.

Michael McLaren:        I mean, look, all of that makes sense, and the increases in child care rebates that you’ve just outlined, I mean, that is very helpful for people who are cutting it very fine with their budgets, but, I mean, what you’re really saying there is the Government is going to extend the bandage over the wound rather than prevent the accident in the first place – the accident being the ridiculously high cost that the market has factored in for this particular service. I mean, surely what the Government needs to do, rather than in essence increase the welfare bill, is to say, right, we’ve got to get operating costs for these child care providers down and therefore drive the fees down.

Simon Birmingham:    And look, currently Government regulations require that centres are open certain hours per day and every day of the week and so on. What we’re actually doing as well is easing some of those regulations so that we can put more flexibility, and hopefully therefore more competition, back into the child care market, and say, well, Government is not going to mandate the hours that you have to be open or the days you have to be open to create that more flexible environment for those centres. There are some other regulatory changes we’ve made as well which we hope will have a downward pressure on prices.

Michael McLaren:        Well, talking about those, I mean, think back to when Julia Gillard was the so-called education supremo, doing all these so-called wonderful things, and you had Labor Party in power. They had a special minister dedicated to early childhood education, but the end result, as you said, of all of those regulation changes was a lot of out-of-pocket costs for citizens and an increasing bill for the Government. I mean, it was ridiculous. It was a good little pat on the back for their union mates. But they had all the child care providers, did they not, go and get university qualifications and, as you say, changing all the opening hours, and the teacher-to-pupil ratios were squeezed, in essence creating an environment which would justify pay rises, justify higher costs for the services, and put everyone out of pocket.

Simon Birmingham:    There’s no doubt that some of those decisions helped drive the big growth in fees that we saw when Labor was back in office, and that’s why we now have been working through, saying, well, what regulations can we manage to unwind without diminishing the quality of care or the opportunity for children to access good quality early childhood education, which is important.

Michael McLaren:        Should the providers, though, have university or tertiary qualifications? I mean, when I went to child care – I think I’ve turned out reasonably normal – the ladies that were working in my particular facility didn’t have all of these qualifications. I mean, is it necessary? Because obviously if you go to university or a TAFE or a school outside of year one to 12 and you do the time, you get the piece of paper, well, you deserve more money because you’ve put yourself through that standard of learning, but is that really what the market here requires?

Simon Birmingham:    Well, the base qualification is still a certificate three qualification, so it’s not a university qual. However, centres do have requirements around having one at least university qualified early childhood teacher in place. Now, most of those centres as well, though, run preschool programs. So, one of the factors you’ve got to consider there is that a lot of those centres are not just caring for babies or little ones, but they’re also caring for children who are aged four or five, in the year before they go to school, and are running a dedicated preschool program that is about preparing those children for school.

So, in that sense education is an important part of what many, many centres deliver and do nowadays. The smaller types of services, the family day care services, don’t have such stringent or high-level qualification demands put upon them because they’re not delivering those type of four-year-old preschool early education services.

So what I guess our focus has been is to say, well, what are the areas where we can reduce some of the cost base of centres, make them more competitive; how can we put in place pricing mechanisms in our subsidy arrangements that constrain future fee growth? And so we’ve acted on exactly what the Productivity Commission recommended there by …

Michael McLaren:        But with of that, with all of what you’ve said, can you point to one example of one child care provider anywhere in the nation that’s dropped their fees since any of these changes have come into effect or been announced?

Simon Birmingham:    Well, many of the changes, particularly those around hours and days of operation don’t take effect until July this year.

Michael McLaren:        Okay, well, after July, do you expect there will be any example of any facility that can say, look, we’ve reduced our costs by 9 per cent and hence the fees have gone down 9 per cent from where they were this time last year?

Simon Birmingham:    Well, look, I think that’s unlikely, but I do hope that what we will see is that fee increases will be at an absolute minimum in future years. I guess it’s about taking action across the board, and that’s where re-aligning who’s getting subsidies and who’s getting support is so critical.

Michael McLaren:        Because the point is- I don’t want to cut you off, Simon, but the thing is people are getting milked. I mean, how can it be that caring for a five, a four, a three-year-old and all the so-called education requirements – not belittling the work there – but how can it cost in essence, in a fee sense, as much to look after a three-year-old as it does a 13 or 14-year-old at a top Anglican school? I mean, it’s insane. Yet, right across the suburbs, people say two things: one, I can’t get my child into a centre because there aren’t enough centres, which to me shows the market’s completely buggered; or secondly, if I do get them in, I’m going back to work, often as the mother, just to pay the fees for child care. Why do I bother going back to work, because I don’t have any money left at the end of my salary to put in the bank to pay down the mortgage or whatever? It’s just madness. The fees being charged are ridiculous.

Simon Birmingham:    Look, that’s why we’re trying to take actions that will stem fee growth in future but also make sure those families who need the greatest support are getting it.  So under our reforms, a family earning around $94,000 with a couple of children in care for two days a week will be some $1500-odd a year better off. So they’re going to see a significant change…

Michael McLaren:        But this is better off at the Government’s expense, the taxpayer’s expense. The problem is, as we said, this extends the bandage. I’m not against the reforms, it’s a step in the right direction – heck, it’s better than what it was – but still, we’re not getting that primary cost down. So you’re paying more, that means all of us – or taxpayers – are paying more to deliver an essential service to keep the economy ticking over, when what we really want to do is get that primary cost down, right?

Simon Birmingham:    Well, ultimately, when it comes to the staffing arrangements in centres, you can only reduce those costs if you were to say to centres that they could have fewer carers per child, or indeed reduce the wages of the carers who are looking after …

Michael McLaren:        Why don’t we have fewer carers per child then?

Simon Birmingham:    Well, there are obviously safety aspects there, as well as educational aspects, about what’s required. There’s also …

Michael McLaren:        So, I was less safe when I went to child care than perhaps my child will be in a few years’ time going to child care?

Simon Birmingham:    Well, Michael, I’m not sure …

Michael McLaren:        I got through alright. The rabbit didn’t attack me in the sandpit.

Simon Birmingham:    I’m not sure how many people were looking after you when you were going to child care, and I certainly can’t remember how many people were around when I was going to kindy, but what we do know is that there’s a careful balance to be struck there. Now, the states and territories play a big role in terms of the actual regulation and approval of what the minimum numbers are for different settings. That’s why we continually work with them and push them to say, well, what other regulations can we manage to ease? And we’ve had some wins there. We’ve taken some big steps at our level to try to ease some of the regulatory burdens and increase support, but then there are those that do fall squarely back on states and territories, whether that’s in a planning sense, or indeed in some of those staffing decisions as well.

Michael McLaren:        Yeah, well, look, as I say, on balance I think you and the team ought to be congratulated. The reforms are good. I think we’ve still got a way to go, and of course you can throw into all of this, when we talk about costs, the rising cost of land to establish a centre, rising energy costs. All of these, of course, feed into fees, and governments have a role in that too. But look, I thank you for your time this afternoon, really appreciate it.

Simon Birmingham:    Pleasure. Thank you, Michael. Anytime.

Michael McLaren:        Thank you. That’s our Education Minister, Simon Birmingham.