Interview on ABC News Breakfast with Michael Rowland
New child care package




Michael Rowland:        Now, a massive shake-up of the childcare system starts today. It’s estimated

one million families will be better off under the new scheme, while almost 300,000 will lose out. Let’s get more now from the Federal Education Minister, Simon Birmingham. He joins us now from Sydney.


Minister, good morning to you. What problem are these changes hoping to solve?


Simon Birmingham:     Well, good morning, Michael. These changes are going to give more support to more Australian families. We know that for too long, Australian families have found the cost of child care to be too much of a burden on the household budget, and that in too many cases it’s prevented people from deciding to go back to work or to work that extra shift or that extra day. So, what we’ve done is invested, as the Turnbull Government, an extra $2.5 billion into support for the child care system, overhauled the system of old different complex payments into one single new child care subsidy, and that one new subsidy is targeted so that we give the greatest number of hours of subsidised child care assistance to the families working the longest hours, and the greatest rate of subsidy to the families earning the lowest levels of income.


Michael Rowland:        As you said, there are winners and losers, as is the case in any government change. So take us through those, firstly, who you argue would benefit from these.


Simon Birmingham:     So, nearly one million Australian families are expected to benefit, and on analysis that’s to the tune of around $1300 on average per child, per annum. So that’s a big additional saving in terms of child care support. And families will benefit in a couple of ways. For some, they will see the rate of subsidy increase, which will go up in the case of low income families from around 72 cents in the dollar, up to 85 cents in the dollar coming back to them. For others, they’ll be very pleased to see the abolition of the $7500 cap on the old Child Care Rebate. Under the new Child Care Subsidy, all families earning less than $187,000 per annum are going to have an uncapped new payment, which means that no longer will they get partway through the financial year, run out of support and find that they’re just going to work to pay the child care bills.


Michael Rowland:        285 000 families worse off, who are they?


Simon Birmingham:     So families who won’t benefit are high income families. Families earning more than $350,000 a year will find that they’re not eligible for the new Child Care Subsidy, or people who don’t meet the very light touch activity test, which is just four hours per week of working, studying, training, volunteering, parental leave, caring. All of those different things can be combined. So it’s a very light touch activity test, and on our estimation, around 230,000 Australians will increase their workforce participation because of these changes. So, whilst if everybody continued the same behaviour, there might be disadvantage in that category, we hope that we’ll see a lift in workforce participation, a lift in volunteering for those who want to be able to access the new Child Care Subsidy.


Michael Rowland:        Quite a few parents getting in touch with us saying they are bamboozled by these changes, including having to fill out this activity test. Is it proving to be a struggle for not just parents, but for child care operators as well?


Simon Birmingham:     Well, we’re pleased that more than 1 million families have provided the details necessary to receive the new Child Care Subsidy and ensure a smooth switchover this week. Now, the old system was a Child Care Benefit, which was means tested, a Child Care Rebate that wasn’t, very complex different payment systems that were very confusing for families. I realise that the one new subsidy still requires people to think about how much hours they’re working and what their family income

is, but they really are the only fundamentals, and we’re very pleased with the work and effort and support that’s come from child care providers across the country to help their families and prepare themselves to ensure that this is a smooth switchover, as we give more support to the Australian families who most need it.


Michael Rowland:        Quite a few child care centres, indeed hundreds, have chosen today to, I guess, not so coincidentally whack up their child care fees to come in with this new subsidy. Does that concern you?


Simon Birmingham:     Any fee increase is of some concern. Of course, we did assume that there would be a fee increase at the new financial year, as is often the case. And that’s built into the subsidy arrangements. But we also have taken on board what the Productivity Commission recommended we do, which is benchmark the new Child Care Subsidy against an efficient price. So there’s an efficient benchmark price built in there, which the Productivity Commission recommended should constrain future fee increases, compared with the out of control fee increases that have been in place.


Michael Rowland:        That’s the cap the Government’s got in place, but how do you stop child care companies charging over and above the cap and what can parents do about that?


Simon Birmingham:     Well, child care companies can of course charge over and above the cap, but we at least now have a benchmark price to hold them to account to. The Productivity Commission believed that would restrain the rate of fee increases, whereas in the past, we just saw increased Child Care Rebate paid by the previous Labor government, and there was like a 16 per cent spike in child care fees at the time to just gobble that up. This is designed to keep a lid on fee increases, while providing the support for Australian families. Now, ultimately we will hold child care providers to account and if they appear to be rorting the system or abusing the system, we’ll be watching and we will be calling them out because we want to make sure that these benefits flow through to the families who deserve the most.


Michael Rowland:        Well, you make a very interesting point there, and again, as made- the comments made by a lot of parents, lots of companies are potentially abusing the system. So, are you prepared to name and shame those companies?


Simon Birmingham:     We will be monitoring price movements very, very carefully.


Michael Rowland:        But calling them out, will you name them?


Simon Birmingham:     Yeah, absolutely, Michael. There is no doubt that we want to monitor this, make sure the benefits flow through to families, and if providers do the wrong thing- now, I’m pleased that do date, for example, the nation’s largest child care provider – Goodstart – has indicated that its fee increases will be less than 4 per cent on average. That is in keeping largely with the modelling that’s been done to date, and that they’re changing some of their other practices so they won’t be locking their customers into 12-hour billable days. They’ll be offering different sessions of care to be more flexible to family needs. So, there’ll be a few different moving parts to look at out of this new system, and if providers give that flexibility to families where they might be paying for fewer hours that they don’t use, then that of course is also a potential for significant savings to families and to taxpayers.


Michael Rowland:        Simon Birmingham, thank you very much for joining us on News Breakfast this morning.


Simon Birmingham:     Thank you, Michael.