Interview on Radio National Breakfast with Geraldine Doogue
Topics: New child care package
Geraldine Doogue: The Turnbull Government’s overhaul of child care payments kicks in today, a really very big development preoccupying families across the nation, merging the old system into a single subsidy. It includes changes to the subsidy rate that parents receive and the annual cap for that subsidy. The Federal Government says it will offer more support to low and middle income families and estimates one million of them will be better off, even though it does concede that 280,000 families will be worse off.
Simon Birmingham’s the Federal Education Minister. Welcome back to Breakfast, minister.
Simon Birmingham: Good morning, Geraldine.
Geraldine Doogue: Could you please explain to us exactly what this new single subsidy system means and how the annual cap works?
Simon Birmingham: Sure, so we’re getting rid of the old Child Care Benefit and Child Care Rebate, different payment streams that were terribly confusing, for a new single Child Care Subsidy. The Turnbull Government’s putting an extra $2.5 billion of support behind it and the way it applies is it gives the greatest number of hours of subsidised child care to the families who are working the most hours and the greatest rate of subsidised child care to the families who are earning the lowest income for their hard work. So this really is about creating a very fair system that ensures more support for more families, and as you indicated, an estimated one million families potentially better off as a result of these changes. And on early analysis that’s to the tune of about $1300 per child per annum, so that’s a significant additional assistance with the cost of child care and the cost of living pressures.
Geraldine Doogue: So, essentially everyone will have to register, will they, to be part of this? Because one of the things, it’s obviously immensely to some extent a big bureaucratic change and so people are having to do all their sums again, is that right?
Simon Birmingham: Well, of course to receive the old different payments people had to go through and register and what we’ve asked for people to update their details to ensure that for this new financial year that’s just started, they let us know what the estimated average activity in their family is, so the estimated average number of hours working, studying, volunteering, caring, parental leave, et cetera, and the estimated income across the financial year.
Geraldine Doogue: And you put that through the myGov website?
Simon Birmingham: You put that in through the myGov website, those two pieces of information and that then estimates the number of hours of subsidised child care a family’s entitled to and the rate of subsidised care that family will receive.
Geraldine Doogue: Now, I read that about 300,000 families whom you thought would have registered haven’t yet, so people will be sitting there today, you know, forms and families are just nightmares, what are you going to do for those people? How long can they register- have they got to register?
Simon Birmingham: Well Geraldine, that figure was a few weeks ago and we’ve since then seen the number of families who’ve registered climb from about 750,000 to be past the one million mark now, so we’ve been really thrilled with the uptake. Yes, there might be a small number of families who have not quite got around to putting their details in the system, for those families there’s a three month grace period. So they can update their information at any time and they will be back paid essentially for what they would have been able to receive from today.
Geraldine Doogue: But they’ve got to start paying full fees from today don’t they?
Simon Birmingham: That will be a matter between those families and their child care provider. But yes, potentially they won’t receive the new Child Care Subsidy until they do provide the relevant details to enable payment of that new Child Care Subsidy.
Geraldine Doogue: Okay, so the Education Department says that a lot of families well be well off- better off, but about 200,000- 800,000 worse off. Now, what sort of families are they? Say a family- and that’s a family earning 180,000 a year, so let’s say two of them earning, you know, one earning 100 and one earning 80, what would their subsidy and cap look like and how might it compare to the previous system?
Simon Birmingham: So, for families who are earning, let’s say, below 187 first, they’ll essentially almost all see an increase in the rate of subsidy and also benefit from the abolition of the $7500 Child Care Rebate cap that previously saw many families run out of support midway through the financial year. For families earning above that, they will continue to receive between $187,000 per annum and $250,000 per annum, 50 per cent support on their child care costs. So, that’s a continuance of the current arrangements for those families of getting 50 per cent of the cost paid. It’s only once you get above $250,000, that starts to taper down to a 20 per cent level at around $350,000 family income, and it’s only then that it cuts out entirely. So, it is only for families earning more than about $352,000 per annum that there is no Child Care Subsidy paid compared with previous arrangements. So, I think most of your listeners would think that that’s a pretty fair deal to see the subsidy go up to income levels that high but that for families on very high incomes, the support there is being redirected so that we can give more support to hardworking families on lower and middle incomes.
Geraldine Doogue: So, is the idea to get- to encourage women to re-enter the workforce more, is that- I mean, I think a lot of people are saying, why are they so worried about this activity test? Just explain, please, what’s driven you?
Simon Birmingham: Absolutely. The ambition here is to provide financial support for families to be able to access quality early childhood education but also the child care that is necessary for people to be able to work the hours and days that suit them. On our estimates, around 230,000 Australians will increase their level of workforce participation as a result of these changes because no longer will they have that $7500 cap that I spoke about before, which means that for the last couple of months for many families they have literally – on low or middle incomes – been going to work to pay the child care bills. And no longer will they run out midway through the financial year. And for many families, that means that those who’ve juggled at present to make the old Child Care Rebate stretch through the financial year, they’ll now be able to choose to pick up an extra shift or an extra day’s work if that suits their family circumstances and know the extra child care support will be there to help them out.
Geraldine Doogue: And you’re not worried about gouging by child care operators? Like, the last time there were big changes, we had enormous number of people coming into the industry who really couldn’t- weren’t viable.
Simon Birmingham: So, when the Labor Party, when in office, simply increased the level of the Child Care Rebate, we did see huge price spikes of around 16 per cent on average there for a quarter. We’ve taken the step here of completely overhauling the system, so yes, there’s the new activity test to target it to people working more hours and the means testing arrangements to target it to families earning lower incomes. But there is also what the Productivity Commission recommended, which is a benchmark price against which the Child Care Subsidy can be paid. And that benchmark price has been put in there on the PC’s recommendation to ensure that there is a lid put on future fee increases and a very clear price signal to providers who we will be monitoring and watching very, very closely in terms of their behaviour.
Geraldine Doogue: Lastly, Minister, there are experts who work in early education and care who are worried that you’re removing priority access to child care for children from some vulnerable backgrounds. Under the old system, children who were at risk of abuse or Indigenous heritage or single parent families were given priority on waiting lists to get into child care centres. And there’s a widespread view that this was a very under recognised good yield of the system. How are you going to deal with that?
Simon Birmingham: We have put a $1.2 billion safety net in place, which ensures that for very low income families, the activity test is in part waived to guarantee what should equate to about two sessions of care for those children. But then for children who might be in vulnerable circumstances, children who may be at risk in some way, there is an additional support that can see up to 120 per cent of the child care subsidy paid for those children for up to 100 hours a week, so essentially fulltime care at full cost if required in circumstances for children at risk.
Geraldine Doogue: Well, thank you very much indeed. I shall look forward to reading about how it embeds down.
Simon Birmingham: Thank you so much, Geraldine.
Geraldine Doogue: Federal Education Minister Simon Birmingham joining us.