Interview on Sky News PM Agenda with David Speers
Turnbull Government’s plan to make early childhood education and care more affordable, accessible and fairer

David Speers: With me now, the Minister responsible for the child care package, Education Minister Simon Birmingham. Minister, thanks very much for joining us.

Simon Birmingham: Pleasure, David.

David Speers: What’s the latest on this? I know negotiations have been underway throughout the day. Is this going to get through the Senate tonight?

Simon Birmingham: Well, the Government remains very hopeful that it will. It certainly should, because these are far-reaching reforms to Australia’s child care systems. They will replace a current mixture of complicated different payments with one new child care subsidy that sees an increased investment of more than $1.5 billion by the Australian Government, but importantly sees increased levels of subsidy going to the lowest income, hardest working Australian families. A low income family will see their rate of subsidy increase from around 72 per cent, to about 85 per cent, which will mean they can access a day’s worth of child care for about $15, and that will make the world of difference to their choice, to be able to work they hours they want, the days they choose.

David Speers: And there’s no dispute about the support that you’re offering for the low income families. Some of the issues around the edges, you’ve got a couple of crossbenchers here say ‘why are you still giving any subsidy at all to those at the top end, those earning more than $350,000 a year’? Are you going to budge on that?

Simon Birmingham: Well, the Government has had those discussions with Senator Hinch and other crossbenchers. We are open to supporting those amendments as part of the passage of this package of reform.

David Speers: Giving the wealthier families no support?

Simon Birmingham: We’ve already taken steps that have significantly brought down what is currently an open-ended 50 per cent rebate that people on million dollar incomes can access. We proposed reducing that to 20 per cent, but for very high income families we’ll consider that proposition [indistinct] …

David Speers: [Interrupts] What does ‘very high’ mean?

Simon Birmingham: Well, $350,000-plus is where it currently roughly gets to a 20 per cent level. So we’ve brought that down, as I say, from 50 per cent so that we can fund …

David Speers: [Interrupts] Would you take it down to zero at that point, or zero at a higher income threshold?

Simon Birmingham: Well, that’s probably a logical point and that’s certainly proposed in what Senator Hinch has put on the table.

David Speers: Yeah, so you’re willing to say no subsidy for those on 350,000 or more?

Simon Birmingham: If this helps us to secure better support for low and middle income families, not just those increased rates of subsidies I mentioned before, but the families who hit up against that $7500 annual cap at present, which means that around this time of the financial year they’re often just running out of child care support, and that means the rest of the year they’re either working for nothing, or of course they’re choosing to work less and not able to participate in the workforce. So getting rid of that cap is another critical part of our reforms.

David Speers: Alright, okay. If you get enough of the crossbench you won’t need Labor, but Labor, their complaint and the Greens’ is those most disadvantaged kids not getting enough guaranteed child care at the moment. They get 24 hours a week, and you’re proposing 12 hours a week. Is that enough?

Simon Birmingham: Well, we’ve gone through a very comprehensive process here. There was a Productivity Commission review, which didn’t necessarily recommend that anybody outside of an activity test should be able to access child care, because of course we do have universal access to preschool in Australia, so there are clear, dedicated early education opportunities there. But the Government’s taken the position that we think it is reasonable that, for children in very low income families, often welfare-dependent families, that there should be a guaranteed two sessions of care a week. And now, if you look at the number of hours …

David Speers: [Interrupts] Does 12 hours give them two sessions?

Simon Birmingham: Well 12 hours is pretty close to two school days, it’s certainly akin to two days at a preschool, and so there is no reason at all why 12 hours of care over the course of a week should not be delivered as two sessions of care from an early education perspective. 

David Speers: [Talks over] But Labor says most child care centres operate on a 12 hour day, they don’t offer parents a six hour block.

Simon Birmingham: And we expect the sector to respond to the myriad of changes that we’re proposing here …

David Speers: [Talks over] They’re not saying they will.

Simon Birmingham: … that reduce red tape for the sector. They will no longer face requirements that limit them to the number of hours they must open, or the number of days they must open. 

David Speers: But they’re not budging on this so far, are they?

Simon Birmingham: [Talks over] So we are actually putting in place a more flexible arrangement for those centres to deliver these services. And of course, many, if they’re charging for 10 or 12 hours, frequently those children are not actually there. So right now we’ve got a system where parents and taxpayers are paying for early education opportunities that aren’t being utilised because essentially they’re being overcharged. What we’re proposing here is …

David Speers: [Interrupts] So you won’t shift on that at the end of the day, the 12 hours is it?

Simon Birmingham: Well, 12 hours should absolutely be able to deliver two six hour sessions of quality early education to children …

David Speers: [Talks over] Even if the centre’s not willing to offer that?

Simon Birmingham: … to children – importantly, David – in families who do not meet what is already a fairly light-touch activity test. You only have to work, study, or volunteer four hours a week to meet the activity test, to step onto a higher threshold. 

David Speers: Yeah, but if you’re a parent who does get off at a casual shift at the local business, it’s not a six hour shift usually, right? It’s an eight hour-plus shift. You’re going to need to put your kid into child care for more than six hours. 

Simon Birmingham: Well, in that case that parent is meeting the activity test because they’re working eight hours, which is more than the four hours that’s required. And for casual workers, they’re able to average their hours over a three-month period. So, again, I see some fallacies being spread out there by the Opposition, by even some in the sector, suggesting that people’s variable hours will be a problem …

David Speers: Alright …

Simon Birmingham: … they won’t be having to update their hours week to week. It’s a three-month block of averages.

David Speers: As you say, you’re wanting to pressure the child care centres into being more flexible about this and offering six hour blocks for kids each day. They do normally charge 10 to 12 hours as a block and a lot of these child care centres make a lot of money, as you know; the profit in the sector, I think, is around a billion dollars last year. How comfortable are you continuing to put in more and more taxpayer’s dollars into child care when the profits are still pretty healthy?

Simon Birmingham: That’s why another of the key reforms we’re proposing is, for the first time ever, to put in place an efficient price mechanism, a rate cap that will put a ceiling in terms of the dollars per hour against which taxpayer subsidies are paid. It will send a clear price signal to the market and to parents, and of course it will only be indexed by inflation in the future to really put a lid on fee growth in the future. 

So, this is, as I say, it’s a comprehensive package of reforms. We’ve been through the Productivity Commission, which is where we’ve picked up changes such as this new fee mechanism, this rate cap, we’ve been through three different Senate Inquiries. It delivers more than $1.5 billion of extra support, primarily to low and middle income hard working Australian families, and I’m frankly flabbergasted the Labor Party would even be contemplating talking about voting against something that for a $60,000 or $70,000 a year Australian family with one or two children in child care leaves them $2000 or $3000 a year better off under our reforms.

David Speers: But that efficient price that you’re talking about there, it works out at around $110 dollars a day, is that right?

Simon Birmingham: Yes, that’s about right, yeah.

David Speers: So, centres that currently don’t charge $110 dollars a day, maybe in the outer suburbs, they’re going to quickly increase their fee to $110 a day.

Simon Birmingham: Not necessarily because, of course, a rate of subsidy is not a paying the full share. Parents will still have to be paying a portion of that, which is means tested for 85 per cent to low income parents …

David Speers: [Talks over] Sure, but suddenly they know that the parents are going to get 85 per cent covered if they put up their fees to 110, the Government will pick up the rest, the taxpayer will …

Simon Birmingham: [Talks over] In the case of those very low income. Now, we’ll be making sure, and I’ll absolutely be talking to the ACCC to make sure we don’t see that type of price gouging or fee activity in the market …

David Speers: [Talks over] How do you stop that though?

Simon Birmingham: … in the long term, though, we believe that the type of efficient price mechanism, which was recommended by the Productivity Commission following its extensive analysis, is the best way to keep a lid on the type of fee growth that back in the Labor years was spiking up into double digit figures.

David Speers: Alright, final question. We spent ten years ago less than $2 billion of federal money on child care. What are we going to be spending next financial year do you estimate?

Simon Birmingham: Well, the figures go to around $7 billion or $8 billion next financial year, David. I think it’s …

David Speers: [Interrupts] And after this package comes in, it’ll be more than that?

Simon Birmingham: Well, that’s next financial year. This package does see continued increase in the future, as I’ve indicated. But we think the workplace productivity benefits of that …

David Speers: [Talks over] So it’ll be getting up to close to $10 billion a year.

Simon Birmingham: … are quite  significant. The [indistinct] …

David Speers: [Interrupts] But when it’s going to stop, is my question? I mean, it’s just been on this rise how much we’re pouring in.

Simon Birmingham: [Talks over] Well, that’s why we’re constraining the rate of growth beyond that. So we’re putting place a more effective mechanism that will see more than 200,000 Australian families increase their workforce participation. That has significant economic benefits in terms of our national productivity, in terms of tax revenue to government – a range of other benefits that flow through from that – as well as of course helping those families very directly. Plus, mechanism to keep a restraint on fee growth in the future.

David Speers: Simon Birmingham, we’ll let you get back to those negotiations with the crossbench. Appreciate your time with us this afternoon. Thank you so much.

Simon Birmingham: Thanks so much, David.