Interview on Sky News with David Speers
Topics: Turnbull Government’s child care reforms




David Speers:  Well, the Minister Simon Birmingham’s making no apologies for the fact that under his reforms, as I say, three weeks from coming into effect mean that no longer will an entirely stay-at-home parent be able to access subsidised child care. They’ll have to do at least some work, study or volunteering to access that subsidised child care place. But there is still this problem about quite a number of families that haven’t yet registered. I spoke to Simon Birmingham a short while ago.


Simon Birmingham, thanks very much for your time. So, 350,000 families still haven’t registered online for the new system. You’ve got a three month grace period after the start of July for them to do so without being out of pocket. What happens if they don’t? Do they actually- do they not receive any payment at all?


Simon Birmingham:    G’day Speersy, and thanks for having us on today. Look, there’s more than 800,000 families who have registered already and we’re actually very pleased with the progress. There’s of course still three weeks to go for families to do so, and we’d anticipate that number growing significantly in that time. We are at counting around 350,000 families who may still register. Many of those families, though, haven’t accessed any Child Care Benefit or Rebate since last year or thereabout, so we’re contacting and counting a large volume, some of whom may have no need to keep engagement with the Child Care Subsidy system.


Nonetheless to your question, there’s a three month grace period after the July 2nd start date, and people of course will in that time be able to still register and claim back payments. We’re quite confident that with the numbers who’ve registered to date, with the numbers will still expect to register before 2 July that the three month grace period will be quite adequate in terms of capturing anybody who misses out.


David Speers:  And some of those 350,000 I assume are higher income earners who probably are looking at the new system thinking well, I’m not going to get anything or much at all so I’m not going to bother registering. Would that be a fair assumption?


Simon Birmingham:    Oh look, we don’t know entirely the reasons why. We do know from our research with families and child care providers that many people have said oh look, I know I’ve got to do it but I’ll just get around to it closer to the end of the financial year, when I can make more accurate predictions of what the household income will look like next year. That’s fair and reasonable. We would encourage people still to visit education.gov.au/childcare to make that switch over early, to get it done. Of course, they can always update their details in terms of their hours of work or volunteering or study or their estimated family income up til July 2 or during the course of the year.


But your question is right, there is greater targeting in terms of our new Child Care Subsidy than has been the case in the past; that we are providing more support, investing an extra $2.5 billion; more support to people who are working the longest hours in terms of the hours of Child Care Subsidy they’re entitled to; and more support in terms of the rate of Child Care Subsidy to low and middle income earners, with that then phasing out for families earning above around $350,000 per annum.  


David Speers:  I want to ask you about this activity test. We spoke to your opposite number Amanda Rishworth last week on the program. Her biggest concern is this activity test. First, just explain to us what you actually have to do. You have to be working, studying, you could be volunteering. How many hours do you have to do each week to access a subsidised child care place?


Simon Birmingham:    So indeed, it’s a light touch activity test. People need only work an average of four hours per week and that can be working, studying, volunteering – and volunteering can be for a registered charity or it could be reading to children at a local school – indeed, other activities such as looking for work if you are on Newstart, then looking for work will meet, indeed, the activity test. Parents who are on maternity leave face essentially an exemption from the activity test, that their previous hours of work will carry through while they are on maternity leave. Those who are recognised as carers will of course have their caring work and activity recognised. So we have made sure it’s a very generous activity test, but ultimately we still expect that the new model – the activity test as well as the increased support for families in meeting their child care bills – is going to increase workforce participation. That is a key part of why we’ve designed it. We predict that around 230,000 Australian families will choose to work more hours or more days as a result of not facing child care costs that are a barrier or an impediment to them doing so.


David Speers:  But what about, Minister, what about a family that has made the decision for a year or two – that they may have three, four, five kids – but for a year or two, one parent, might be mum, might be dad, wants to stay at home and do all the all the things that go on in a very busy family. Take one or two years out of the workforce. Are you saying they should not, during that period, be able to access the subsidised child care place for their little boy or girl?


Simon Birmingham:    So we respect the choice that Australian families make as to whether both parents work or whether one parent stays at home or indeed in single parent or other family circumstances, you have different mixes there. That is a genuine choice, and areas such as the Family Tax Benefit provide additional financial support in some circumstances to stay at home parents. But ultimately, the Child Care Subsidy system is there to subsidize child care, and we want to prioritize- to address many of the problems in the current broken model. People who are working, studying, volunteering to ensure they can access the hours they need for care. Now, of course, we also value and recognise the important benefits of early childhood education, which is why as a government we’ve routinely extended our support for universal access to pre-school and that that’s locked in and guaranteed through til 2020. We’re engaging with states to try to boost now participation, attendance rates at pre-school services. We also have a significant…


David Speers:  [Talks over] But what about at the child care, just the poor(*) preschool, that child care level because I mean the Productivity Commission report, on which your reforms are largely based, did point out that early childhood education and care services play a vital role in the development of Australian children and their preparation for school. The benefits are likely undisputed, it said, and there also appears to be benefits from early identification of kids with vulnerabilities. That was the Productivity Commission’s view. But if you are choosing as a family for one parent to stay at home for a little while, you’re saying they should not get a subsidy to put their child into child care?


Simon Birmingham:    We are saying that the Child Care Subsidy should be targeted to those families who are working, studying, volunteering, but of course we provide that early childhood education support through pre-school, through the strong safety net that’s part of the new Child Care Subsidy to capture vulnerable children. Indeed, there is an exemption that is a catch-all for many low income family circumstances, those under around $65,000, to be able to access two sessions of care and quality early childhood education a week. There are of course many other activities that I would encourage as Education Minister families to reach out and engage with, whether they are activities such as library services and reading groups, kinder-gym groups. There’s a range of quality early childhood education-related activities that do really help with the development of young children and their preparation…


David Speers:  [Talks over] But again, let me let me just read from this Productivity Commission report though: it says that enabling the lowest income families, those on parenting payments, some access to subsidized child care without meeting an activity test – without meeting an activity test – may boost early childhood education care participation and improve child development outcomes for this group. So, the Productivity Commission did seem to say that on the lowest incomes there should be subsidized care without an activity test. Are you saying that is there for those under, I think you cited a figure of $65,000 a year?


Simon Birmingham:    Sixty-five, yup. That’s right. That is there for those lowest income families on parenting payments the Productivity Commission spoke about. So we have addressed- and of course this whole package of reforms in terms of overhauling and improving our child care system is based on the work of the Productivity Commission. This has been a long time in the making. The Turnbull Government wishes these improvements had come in twelve months ago but sadly the Labor Party and others held it up in the Senate such that we couldn’t get it in place as early as we would have liked. But happily for Australian families now, the extra support is on the way. And that extra support, based on the latest assessment of those who have registered to date, is going to see families around $1300 per child, per annum better off.  And we know from earlier modelling that we expect around 1,000,000 Australian families to Benefit and around 230,000 – as I said before – to increase their level of workforce participation. Because no longer will the family hit February or March of the financial year and run out of Child Care Rebate or child care support…


David Speers:              [Talking over] Hit that cap. That dreaded cap.


Simon Birmingham:    …all families under 187- that’s right, it’s increased for higher-income families.


David Speers:              Let me ask you finally about one other element that really bugs a lot of people when it comes to child care, and that’s fees going up and up each year, particularly in some of our big cities. There is another element of your reforms which I just want to touch on here that is aimed at trying to tackle this, injecting a bit more competition into fee-setting. Just remind us how that works and how this might actually keep some downward pressure on fees.


Simon Birmingham:    Well, that’s right. So again, following the advice of the Productivity Commission we’ve put in place essentially an efficient pricing mechanism that the rebate that can be received will be capped according to an efficient price delivery of child care. That’s an hourly rate and it’s been struck to ensure that it captures at least around 80 per cent of child care services and what they currently charge across the country, and that will then be indexed in the future. But our anticipation based on the Productivity Commission analysis is that that should slow rates of fee growth because it will provide a benchmark at which fee increases can be compared against. It will ensure that there’s pressure on services to work within that benchmark, and of course it’s a key part here that we’re not only providing increased support to most families at most income levels. We’re not only getting rid of that cap on the Child Care Rebate for many families, but we’ve designed it in a way where actually fee growth should be contained. We did see under the previous old broken model when Labor was last in government that they upped the allowable level of the Child Care Rebate at one stage ,and all that happened was fees just went up and most of what parents got was gobbled up in fee increases. So, that’s why this is such a significant structural reform – the biggest improvements in 40 years – because we’ve tackled each of those component factors.


David Speers:              And I can understand the aim of that new approach to an efficient fee. Is there any danger though that some child care centres who may be charging at the moment above that efficient benchmark, they’re going to have to cut costs? And there’s not a lot of fat, as you know, when it comes to most child care centres. But if they’re now facing a more competitive market against child care centres in their neighbourhood they will have to cut some costs.


Simon Birmingham:    Well, we would urge and encourage child care providers to make sure that they are operating wherever they can within that fee cap, and yes, whilst delivering quality early childhood education and care services, but they also look to be as efficient as possible. We’ve made some regulatory changes as part of this too so that no longer are the same requirements in place that mandate a child care centre to be open a certain number of hours each day or a certain number of days each week. So they’re getting greater flexibility in their business model as a result of some of the regulatory changes. Again, trying to make sure that we get the balance right, particularly in regional areas; it’s very important for country services, mobile services, to perhaps only operate a couple of days a week to meet local demand to be able to provide a quality service but that’s where the viability threshold kicks in. The new model will allow that to happen, unlike an old requirement that forced people into perhaps business models that caused them to have to charge higher practises. And already, happily, we’ve seen Goodstart – the nation’s largest provider of child care and early learning services – Goodstart has indicated that they are going to move to a more flexible daily session time model, which will give parents more choice, rather than everybody having to take an eleven or twelve hour session.


David Speers:              Alright well they’re really interesting changes, big changes indeed for the sector ahead. Simon Birmingham, thanks so much for joining us today.


Simon Birmingham:    Thank you David, my pleasure.


David Speers:              And we’re going to come back to this discussion, particularly around whether stay at home mums or stay at home dads should be given a taxpayer subsidised child care place, with our panel shortly.