Interview on Kidspot’s The Juggling Act with Mel Wilson
Topics: Child care reforms; Child care centre opening hours and availability
Mel Wilson: So I’ve got two children under the age of five: one one-and-a-half, and a four-and-a-half-year-old, and they’re both in day care three days a week. And I got a phone call from our centre director mid-February telling me that I’d reached the threshold, the child care rebate threshold for one of my children. The fees for that room are $145 a day, and I was just about to reach it for my daughter’s room, and her fees are just under $125 a day. So this is Inner West Sydney. And I hung up the phone from her and I cried. I just thought- I did the math. I’m facing over $800 a week, which is $3200 a month for the next four and a half months until the end of the financial year, and I just couldn’t see any other way out of it. I’m a single parent, so I have to work full-time just to try and stay afloat.
I cut back everything I could. I cut back our health insurance, ditched the home insurance, I dropped my mobile phone plan down. I tried to do everything I could to see if I could get by until the end of June and just knew that nothing was going to work. And so the extreme that we’ve had to go to is I’ve pulled the kids out of the day care that they’ve been in since my daughter was 10 months old, and we’ve sent them to a quite a bit cheaper one down the road from us, so still I’m at the threshold, so still paying full fees for the rest of the financial year. And then I spoke to my parents about it, who live in country Victoria, and felt quite helpless that they haven’t been able to do anything for us, and my mum said I want to quit my job and fly up every Sunday, go back every Wednesday, and look after your kids for three days a week for the next four years until my youngest starts school.
Cassie Hamer: Wow, we need to clone her. Can I have your mum?
Mel Wilson: Oh, everybody that I’ve told that story does start to get a little bit teary. They’re like, I cannot believe the sacrifices that your parents were prepared to make just to try and help me out and to help ends meet, and it’s quite a common story for thousands and thousands of parents across the country with kids that age. It’s such a struggle, and the financial demands of child care versus working are huge, and have such a far-reaching impact.
So welcome to a special episode of The Juggling Act, a podcast by Kidspot: For Parents about Parenting. I’m Mel Wilson, the editor of Kidspot, mum to two children under five, and today I’m joined by writer and mum of three, Cassie Hamer. Hi.
Cassie Hamer: Hey Mel.
Mel Wilson: And we’ve got a very special guest today, the Federal Education Minister Simon Birmingham, who is here today to break down the child care reforms for us and answer all of your burning questions. Welcome.
Simon Birmingham: Thank you very much, Mel and Cassie.
Mel Wilson: Now I just wanted to touch on- on your website, you even said that the system has been broken, and it’s been broken for a very long time, and it feels like a leaking bucket, I guess, where different people have come along and tried to patch up certain aspects of it and try to fix things to get us by, so to speak. So these changes were more than overdue. Talk me through what it is that your- the key kind of points that you’ve made.
Simon Birmingham: So the changes are really overdue, and previously when you’ve seen things happen like an increase to the cap on the child care rebate, it’s kind of just been gobbled up by increased fees and hasn’t delivered the help you want to see for parents. So we went right back to first principles with these reforms, had the Productivity Commission do a thorough analysis, lots of engagement and consultation. They said you need to change the model entirely; you need to look at putting in place an efficient pricing mechanism to try to keep a lid on fee growth in the future. You need to put in place a model of child care subsidy that is better aligned and targeted to how much people earn, and therefore providing the greatest subsidy to low income families, to help them participate in the workforce or get back to study or volunteer and engage. And that’s the type of reform we’ve put in place: a whole new child care subsidy which for families earning less than $185,000 a year will see that ubiquitous $7500 cap abolished, gone completely.
Mel Wilson: [Talks over] Thank God. Could not go too soon. Amazing, yep.
Simon Birmingham: No more cap at all for all lower middle income families, and for higher income families it will lift from $7500 to $10,000 in terms of providing them with greater headroom for being able to work more hours, work more days, without of course hitting that cliff in terms of child care support during the year that hurts so many families right about this time of year.
Mel Wilson: Oh, exactly. We’ve had so many readers reply to all of the articles that we’ve written about child care reforms, and it’s just heartbreaking the number of people that are in that situation. And now you’re also changing the eligibility, the activity test for families. Talk us through that bit.
Simon Birmingham: We’ve really tried to structure something that’s built as best it can be around fairness. So we want to make sure that the greatest hours of care and support go to families who need it the most, which means the more hours you work, the greater the eligibility to receive a number of hours of child care support you receive. The less you earn, the greater the rate of child care subsidy you receive. So for low income families, their effective rate of subsidy will increase from around 72 cents in the dollar under the current child care benefit, child care rebate model, to 85 cents in the dollar under our new child care subsidy.
In terms of qualifying, there’s an activity test being put in place. It’s a very light touch activity test. It requires four hours a week of working, studying, or volunteering for people to get onto that first rung of child care subsidy support. It does help us to ensure the hours go to people who need it most in terms of participating in the work force and their activity, but it is also very light touch so that all you need to do to qualify is volunteer at your child care centre or preschool or an older child’s school by reading to the kids for four hours a week or something like that that can get you onto that first run.
Mel Wilson: So people that are still looking for work or out of work, obviously it’s quite simple for them to then get access to it because they can do something, as you just said.
Simon Birmingham: That’s right, so for people who are actively looking for work- looking for work is a recognised activity. So in that sense, if you are on Newstart and out there trying to find work, then your access to child care support is guaranteed. If you are a stay at home parent but you want to make sure that your child’s having access beyond the guaranteed levels of preschool support and so on that exist already, then there are ways you can do that by volunteering and participating to get those hours of support too.
Cassie Hamer: Mel, I don’t know about you but I always have to plan ahead, so I’m already thinking about next year and what care arrangements I’m going to have for my children. I know to the exact dollar what I get under the current system. Is there a way that I can find out what that payment is going to be under the new regime?
Simon Birmingham: There are some online calculators and we’ll have some more information on that coming soon, but absolutely people should go and have a look at Education.gov.au and follow the links from there, where they’ll be able to find details about how the new model will work and the subsidy rates that are available. As I said, it’s geared very much in a way to provide greater support to low income earners, so an 85 per cent subsidy for people earning less than $65,000 per annum or families earning less than $65,000 per annum, which tapers down to a 50 per cent subsidy at around the $185,000 mark, six- 50 per cent for a fair way then before eventually tapering out at about $350,000.
Cassie Hamer: And it’s going to be calculated though a little bit differently, because at the moment you get a rebate based on what your centre charges you, so whatever your out of pocket costs are. But I understand with this, it’s going to work a little differently with a per hour kind of a subsidy cap?
Simon Birmingham: There is an hourly fee cap or rate cap that we’re putting in place, so that you’re getting paid a subsidy against the rates you’re charged up to that cap. And that’s really designed to try to send a clear price signal into the child care market about what a reasonable price is. That’s then indexed in the future and it was a core recommendation of the Productivity Commission to try and get away from those huge fee increases that we often see year on year, and to make sure there’s some constraint.
Mel Wilson: [Talks over] Well, there’s some who are up to 160 bucks a day [inaudible].
Cassie Hamer: [Talks over] Yeah, if you’re at a centre that’s charging you 160 bucks, does that mean you’re not going to get a rebate based on that 160? Or how will that work?
Simon Birmingham: So depending of course on the number of hours that that is for, but if they’re charging above that hourly rate cap, then the cap in a sense on your child care subsidy will be against the hourly rate cap. But we are hopeful that we will see some price movement by some of those centres.
Cassie Hamer: Feels a bit like the horse has bolted.
Mel Wilson: I know, and there’s just such a demand for child care at the moment, with like- I mean, waiting lists is a whole other issue that I kind of want to touch on as well. But I know in the Inner West of Sydney, like, the second a new place opens up they can charge whatever they want because parents are so desperate to get a place.
Simon Birmingham: So we’ve got a big new community child care fund that we’re putting in place as well, which we hope will be accessed by services in areas of particular need to ensure we do get additional services starting up. So that’s something people will be able to bid into. But ultimately, I think we’ll also see some changes because there’s now certainty in the marketplace. We have a better child care system of support coming for families, but that doesn’t just work for families. It also works for those who choose to operate and run child care centres, that they’re able to say well, now we know the type of support that will be available; now we know that the vast majority of families won’t ever fall off that cliff in terms of their annual support anymore. It makes for a more certain investment proposition that hopefully can create more places too.
Mel Wilson: And now the bulk of the changes are not going to come into effect until July 2018, is that correct?
Simon Birmingham: That’s right.
Mel Wilson: Why- why the wait?
Simon Birmingham: Because they are quite big changes, and we do have to get all of the technology and systems and everything else that underpin them in place, and I wish it …
Mel Wilson: We all had our fun with Centrelink.
Cassie Hamer: I love myGov.
Simon Birmingham: I do remember sitting down after our first born and trying to work through all of that, so. Courtney was sitting there with Matilda on her lap and I was sitting at my laptop going God, this is painful. So we are building a whole new IT model that hopefully will be simpler for families in terms of the way they interact with the system, but also actually for services as well. We’ve all been there in going in, and you sign the scrap of paper about what time you’re dropping off and what time you think you’re going to pick up. And the new model will hopefully all be electronic. You’ll be able to swipe in, swipe out. What that will mean for the centres is they no longer have to take all of those scraps of paper and put them into a report that goes into the Government’s data system and is very time-consuming for them.
Mel Wilson: [Talks over] Less time spent on paper work and more on the kids …
Cassie Hamer: [Talks over] Yeah, I know. They’re drowning in it.
Simon Birmingham: Exactly. That keeps their costs down or gives them more time to spend actually in quality education and development and care for the kids in the service. So yes, unfortunately that takes a bit of time for us to build all those systems and settings, but we’re also, when we’re talking about a multibillion dollar system of subsidy, have to get it right. And so there will be a lot of testing over the course of this year to develop it, design it, to road test it with real centres so that hopefully it is a very smooth transition for families and services in the middle of next year.
Cassie Hamer: And you mentioned the drop off and pick up, and my centre for example is open for 9 hours per day, but we only use it probably for about 7 hours per day. I understand that the child care reform is going to address that issue as well.
Simon Birmingham: It’s certainly going to provide more flexibility for centres. So the current law requires centres to be open a minimum number of weeks of the year, a minimum number of days in the week, and a minimum number of hours in the day. So it’s very prescriptive. The new reforms are just going to require a minimum number of weeks per year, and then services can be flexible about they choose to operate in terms of days of the week and hours of the day that suit them.
Mel Wilson: So mostly positive changes there. We’re basically seeing a much simpler system, hopefully, for parents and child care centres, and more money to help parents meet the demands and the higher costs of child care. So let’s have a quick listen to some of the Kidspot parents and hear their thoughts on these reforms.
Unidentified Speaker: On the child care reforms, I find the whole topic really confusing. I struggle enough understanding what the current system is, so …
Unidentified Speaker: Child care is pretty much taking- it’s killing us. It’s way too expensive. Two parents who work full time and most of our- we’ve got more money going on child care than on rent.
Unidentified Speaker: The actual cost of child care overall, it’s definitely a profit industry. If you’re running a child care centre from a point of view of myself, putting my son in child care, it’s a requirement with two working adults as the other two members of the family.
Unidentified Speaker: I think everyone has a problem with the cost of child care, but my main problem is that not only does my whole pay packet go to them, I would like to see it go to the people that it matters most, and that is the workers.
[End of excerpt]
Cassie Hamer: I just wanted to say, we’ve been the beneficiaries of some amazing care from some beautiful childhood educators over the past few years, and it would be remiss of me not to mention how poorly they’re paid, and I know this is probably outside of the ambit of these reforms, but what can we do about this?
Simon Birmingham: So there’s been a very long-running case before the Fair Work Commission, which has been hearing all of the evidence, and I trust in the not-too-distant future we’ll make a decision about the setting of wage rates in the sector, and that’s a decision that we’ll be happy to see made, and we’ll of course support the implementation of whatever that is, and it’s a case of- as is often the sort of matters around industrial relations backing, the independent umpire will hear the evidence and work it out. But look, I agree. If I- as Education Minister and as a dad, if money were no object and budgets were no object and so forth, well, I’d love to see teachers and early educators and so on receiving all the money in the world for the incredible work they do in settings that most of us think about not just living in our homes with our two or three young children, but working day in, day out in rooms full of two and three and four-year-olds … [laughs].
Mel Wilson: I drop my kids off and I just go I don’t know how you guys do it.
Cassie Hamer: It’s a tough gig. They do it for the love, which is …
Mel Wilson: Oh, I know. But you know, like, they’re more than just babysitters who wipe snotty noses.
Cassie Hamer: Yeah, they deserve more. Absolutely.
Mel Wilson: They do just- blows me away.
Simon Birmingham: Absolutely. I mean, that, from everything around the behavioural skills that help prepare kids before they go to school, to the basics of starting to learn the different sounds, the phonetic awareness, to starting to hold a pencil the right way. All of those sorts of things are really critical.
Mel Wilson: And you touched on waiting lists before – this again probably slightly outside of the topic that we’re talking about – what are we going to do about that? I mean, I got a phone call from a child care centre at the beginning of this year saying they would kind of like to offer my daughter a place, who was about to turn five, and I had put her name down at that centre when I was about four months’ pregnant. So nearly five years to get a phone call. It’s another massive, massive issue for the child care sector.
Simon Birmingham: It can be in places. And there’s sort of- there’s a couple of problems I see there. There’s the locality problem, and we face that. We lived diagonally across the road from a long day care centre, and put our eldest daughter’s name down there before she was born, and then when the time came around 18 months later to say we’re looking for a spot, there still wasn’t one, so we had to go to a different suburb, and away we went. Wonderful community child care centre that we engaged with and were happy ever after in that sense, but it would have been so much simpler to just walk backwards and forwards across the road, especially when you’ve got family picking them up, you don’t have to worry about child seats and all those things in the car and so forth. So I get that, but in a sense, that wasn’t a problem of availability that we faced. It was just that the centre we wanted …
Cassie Hamer: Convenience, yeah.
Simon Birmingham: … didn’t have the spaces.
Mel Wilson: [Talks over] Oh, I can tell you [indistinct] that’s not the case [laughs].
Simon Birmingham: That’s right. In other parts of the country, there are indeed pressure points of availability, and as I said before, I hope that a more certain environment for people to invest in creating those places, some of the incentives we’ve put in there can drive and create more spots. We are seeing substantial numbers of new places created each and every year. We just need to make sure that they’re also being created in the right locations.
Mel Wilson: Right areas. I just wanted to touch quickly on a couple of reader questions that we had sent in. So Marg Raffety(*) wanted to know why the costs of child care are not tax-deductible when you’re only using it because you’re working.
Simon Birmingham: Because tax deductibility of course provides the greatest benefit to the highest income earners. I’m a Federal Cabinet Minister; my salary is on the public record for everybody, and I’m at the highest tax bracket. So if we were able to deduct the cost of child care, in my case I would get a far greater benefit on my highest tax bracket than a family earning only $80,000 a year necessarily would, who’s on a much lower rate of tax. So it in a sense gives you that wrong incentive there. We want to make sure that people have the support to be able to return to work or work the hours they want to without child care costs being an impediment to do so. So for low and middle income earners, that’s where you want to provide the greatest level of subsidy, because that way by picking up those child care costs, you’re removing that barrier to people making that choice, and it’s about choice. In the end, people can choose not to go back to work and if they can afford to, to stay at home and care for their children and their other supports that the Government provides to stay at home parents, but if you are choosing to do so, we want a system that makes sure child care costs are not a barrier, and the new child care subsidy better targets that than tax deductibility would.
Mel Wilson: We’ve also got a question here from Maria Kerriaku(*), who wants to know what the reforms will offer single parents.
Simon Birmingham: So for single parents – and I guess heard your circumstance right there at the start where the choice to work is not necessarily a choice in many instances, and therefore it’s a necessity, and by having a model that targets the highest level of support to people who need the hours and are earning the least does guarantee the most effective support for parents in those types of circumstances.
Mel Wilson: I think a lot of her concern as well was around the cuts that are having to be made to fund these changes, and so I think part of that, my understanding is to extend wait times for people that are on single parent payments, is that correct?
Simon Birmingham: So the only real change is in terms of family payments and those sorts of things that happened to fund these changes was a freezing for a couple of years of Family Tax Benefit payments, or some types of Family Tax Benefit payments. So nobody goes backwards in that sense. It does mean that people will simply stay at the same level of Family Tax Benefit payment in those circumstances for a couple of years, but the benefit that families actually receive in terms of additional child care subsidy will for many and particularly the neediest far outweigh what they might lose from not having a very minimal level of indexation.
Cassie Hamer: I read some information that the child care industry, I think it was in- a couple of years ago, made a billion dollar profit, which sounds huge, and I wonder, is there actually room for profit providers in this space, given that we know now important the education of children is at this really early age. Shouldn’t we be making it a bit more like the school system where we just don’t have for-profit providers?
Simon Birmingham: The sector I guess has grown up in a very different way to schools, and yes, that’s right, while we have lots of non-government schools operating in Australia, they are all non-profit entities in terms of the way they operate. And that’s a requirement in terms of receiving school funding. The child care sector has developed in a vastly different way. There are of course many family day care providers out there who are simply stay at home parents who’ve decided to set up their own business in their home and care for three or four children per day, and that is their for-profit business. The profit though just happens to be to really pay them a wage as a result of that. So it’s a vastly …
Cassie Hamer: [Interrupts] But there are some providers who have shareholders, and they’re making some huge profits out of our four and five-year-olds’ education.
Simon Birmingham: Yes. Indeed there are. Now, the biggest provider in the country is Goodstart, who again are a not-for-profit provider and do a fair bit of reallocating some of their funding through the system. You’ll see that in a Goodstart model, I think they’re fairly sensitive to the locality they are and the prices they charge, and they will cross-subsidise for areas of social disadvantage and so on. I hope that out of the types of changes we’re making, the reduction in red tape, as I said before, around the number of hours they have to work, some of the changes to the reporting requirements and so on, that we can really try to drive more efficiency in the sector, and the key there is to then see that translate into prices the parents pay, because the lower the price that’s charged to parents, the less the taxpayers having to fork out in subsidy as well.
Mel Wilson: Really great to chat through the reforms, and appreciate your time, and thanks to all of you guys for listening. To read more about the child care reforms, head to the Government website, or to Kidspot. We’ve got it all broken down for you. And head to our Facebook page. Let us know what you think, and don’t forget to rate us on iTunes. Thanks guys.
Simon Birmingham: Thank you very much.
Cassie Hamer: Thanks Mel.
Simon Birmingham: Thanks for having me.