Interview on 6PR mornings with Gareth Parker
Topics: New data on child care fees; University student employer survey results;

Gareth Parker: Child care costs: they are – for parents – one of the biggest line items in the family budget. Is there perhaps some relief on the way? My next guest on the program is the federal Education Minister Simon Birmingham.

Minister, good morning.

Simon Birmingham: G’day Gareth, good to be with you.

Gareth Parker: Thanks for your time today. You’ve got some new figures on the average child care fees for the coming year. What can you tell us?

Simon Birmingham: Well, what we’ve seen is that the rate of growth in child care fees has reduced compared with previous years, and that’s good news, but of course, it’s still an increase in fees and I know many families are struggling there, which is why, as a government, we’re also completely overhauling the child care subsidy systems that are in place at present, so that from July this year there will be a new system in place that sees $2.5 billion of extra government support, better targeted as well towards those families who most rely upon accessing child care services to be able to work the hours that they need to, and ensuring that that subsidy really is targeted to hardworking low and middle income Australian families.

Gareth Parker: Okay. I’ll ask you, perhaps, about the details of those subsidies in just a few moments, but I just want to get a sense for what fees are actually doing at this point.

Simon Birmingham: So, fees, of course, will vary from centre to centre, as they’re independently operated, but what we’ve seen over the last year is that fee increases have been limited to around 3.9 per cent on average across the child care system, which is well down on close to 7 per cent increases that we saw on average during the period of the previous Labor government. Indeed, we even saw spikes of fees growing by up to 14 or 15 per cent at some points during that time. So, efforts we’ve made through some regulatory changes and otherwise have helped to constrain fee growth for now. What we’re going to do in the future now is put in place a new child care subsidy model from July this year with better, more targeted help for families, as well as certain mechanisms around the way in which that’s calculated that the Productivity Commission recommended to help constrain fee growth even more in the future.

Gareth Parker: So a 7 per cent average annual increase under the former government, that is clearly quite difficult for families to deal with. Any year that anything goes up 14 per cent is difficult to justify. You’re claiming some credit for holding the rate of growth across the board – as you said, it’ll vary from centre to centre – but you’re claiming some credit for holding the increase to 3.9 per cent. That’s still, what, double, really, the inflation rate, isn’t it? What’s driving the increases in costs? Why is child care growing in cost more quickly than inflation generally?

Simon Birmingham: Gareth, there are probably a number of factors, and certainly some of the additional effort put in to staff skills, training and wages over recent times have been a factor, and in many cases it’s hard to argue that some of those individuals deserved either the additional payment or indeed that children and families will benefit from the more highly capable staff. But we really tried to slow down some of the regulatory impost that had been put in place that were driving up some of the costs as well, and so we’ve got agreement from the states and territories to some technical changes to regulations, but changes that we think should ease some of the administrative costs and burden on centres that should flow through then to lower cost pressures for parents and families.

It’s about really keeping an eye on every possible thing we can do to keep a lid on those fee increases, to also make sure that when it comes to centres who are looking like they’re ripping off families or the taxpayer, that we take strong action, and especially in the family day care sector we’ve been doing quite a lot of that lately to really send a clear signal that if people are engaging in excessive fee practices, they’ll be caught, they’ll face increased scrutiny and we’ll throw the book at them if we have to.

Gareth Parker: So is there much rorting?

Simon Birmingham: The overwhelming majority of centres do the right thing, provide high quality care and are very reputable, but unfortunately there has been a degree of that, and we have saved many hundreds of millions of dollars as a result of crackdowns in family day care in particular from people who, frankly, were claiming care for children who weren’t even there at the hours that care was being claimed for.

Gareth Parker: Okay. You mentioned that some of the increase in cost has been around the increase in cost of staff; there have been pay rises – child care workers among the lowest paid fulltime employees in the economy; that’s just the facts. There is, I guess, a bit of a debate going on as well about the extent to which child carers, as I’ll call them – in inverted commas, as a general name, whether they’re early childhood educators – where do you and the Government stand on the question of what skills are needed to work in this sector?

Simon Birmingham: Well, we support the current arrangements in the National Quality Framework that stipulate a ratio-type arrangement in terms of having a skilled early childhood teacher overseeing a range of early childhood educators working in a collaborative environment in child care centres, in long day care centres. Now, in terms of their pay structures, some of those matters are before the Fair Work Commission at present, and as we have with everything else, we will respect the findings of the independent umpire there. The Government’s approach is to make sure that that case is informed of the facts, but otherwise let the litigants in it undertake their arguments.

Gareth Parker: Okay. My guest on the program is the federal Education Minister Simon Birmingham. We’re talking about child care. I’d be keen to hear from you this morning: 92211882. About 3.9 per cent is the average increase across the sector last year. Is that what you’re seeing out and about in the suburbs of Perth? I’d be really interested to know if you’ve got a story about child care fees, what they’re doing, if they’re going up, maybe if they’re even going down. I’d be really interested to know what is happening in the community that you live in. Give us a call: 92211882.

You mentioned, Minister, the subsidies scheme. Can you just outline perhaps some of the eligibility requirements and how you’re trying to make sure that, as you said earlier, this money that’s being made available from the Government is targeting people who need it most?

Simon Birmingham: Absolutely. So, what we’ll be doing as of July this year is abolishing the current arrangements of a separate Child Care Benefit and Child Care Rebate, a complex mix of different payments, and rolling them into an integrated Child Care Subsidy for Australian families. In doing so, we’ll, for families earning less than around $185,000 a year, be abolishing the $7500 cap that recipients of the Child Care Rebate currently face, which will mean that families who currently run out of support for their child care bills in the first six months of a calendar year, or the second half of a financial year, will no longer face that ceiling in terms of their support and will really be able to choose to work the hours, days and weeks that suit them and their family circumstances. Overall, our changes will benefit around 1 million Australian families and really will see the greatest gains made by low and middle-income families, who in some instances will be $1000, $2000 or $3000 a year better off as a result of these changes.

Gareth Parker: Okay. So that’s the child care story. 92211882. Give us a call if you’ve got a question- sorry, an observation to share about the child care market. I’d be really keen to know what’s going on in your local centre.

Just on another issue in your portfolio, Minister. The Australian Industry Group are out there today, suggesting that for a great many university graduates, that their degrees are really not worth much and that many of the people turning out in some industry sectors basically are unemployable, despite the fact that they have gone to university, achieved a degree at some expense to themselves and also to the Australian taxpayer.

Simon Birmingham: Look, there are some key findings in this new survey data of Australian employers and their satisfaction with graduates. Just before I address that, I should say families interested in terms of the impact of the new Child Care Subsidy ought to check out the child care estimator that we’ve got online, that they can see how it impacts on them.

Gareth Parker: Yeah, good advice.

Simon Birmingham: In terms of this new employment satisfaction data, it shows a bit of a decline in terms of the extent to which some employers are satisfied with graduates coming out of our universities. We, and universities in particular, should take that as a clear sign that they need to make sure that graduates are getting skills that are what employers need and what our economy needs for the future. It’s one of the reasons why, as a government, we’ve proposed holding some of the universities’ funding, or in future their funding growth, contingent upon performance.

What we want to assess there and incentivise is unis doing more to make sure that the students they enrol are capable of success, do succeed and complete their degrees, that we turn around some declines in relation to completion rates, that the students are satisfied with their experience, that they are getting good employment outcomes, that we turn around some of the declines in short-term employment outcomes for graduates, and of course that employers are satisfied with the skills those graduates take into the workforce. It’s really about ensuring that what is a record level of funding going into universities, record numbers of enrolments that have been in universities, are actually targeted towards getting good value for those graduates and their time and money, and, as you rightly say, good value for taxpayers.

Gareth Parker: So on exactly that point, record enrolments, record investments of public money – I presume pretty close to record HECS debts as well; it would be surprising if that was not also the case – but for some years now, you and your Government have been trying to rein in university spending. Are you going to have another go at that in 2018, and if so, what’s the approach going to be?

Simon Birmingham: Well, at the end of last year, we made some decisions in the mid-year Budget update, where we decided to take some steps that didn’t require legislation so that we were actually able to bring to an end an attempt, as such, to get reform in higher education and seek to achieve it in a different way where it can’t be held up by the Senate.

Look, I know the universities would rather they continue to be able to write their own cheque, as is the case at present, but our approach is that we believe that there ought to be this type of incentive and assessment of whether funding growth is justified in the future. That’s why we initially proposed performance-contingent funding in last year’s Budget. What we’ve decided to do now is to use powers in the existing legislation to essentially freeze one stream of payment to universities at current levels for a couple of years. During that time, we’ll sit down with the unis, negotiate the performance criteria they need to meet, and future increases will then be continued upon them meeting that performance criteria around graduate outcomes and the like.

Gareth Parker: So is there going to be any further attempt to change legislation before the next election, or are you running up the white flag on a legislative solution in this Parliament?

Simon Birmingham: Well, we’ll keep talking to all players. If there’s something that needs to be done, of course we’ll be open to it, but we’ve announced new policy approaches now; we want to make those work with the university sector. There are some changes to the HECS-HELP repayment arrangements that will still be put to the Parliament, so there will still be some element of measures to make sure there’s affordability and sustainability in higher ed that we address. But importantly, in terms of funding direct through to universities, they now have certainty as to how that’s going to work for the next couple of years, what it will be set at, and we will work with them around the performance measures they need to meet to have growth beyond that.

Gareth Parker: Alright. Simon Birmingham, Education Minister, thanks for your time this morning.

Simon Birmingham: Pleasure, Gareth. Any time.