Cheaper Child Care

It is a privilege to introduce the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022.

This Bill will cut the cost of child care for around 1.26 million Australian families.

Early childhood education and care is incredibly important.

It’s also expensive. Anyone who has a child in care knows that.

Costs have gone up by 41 percent in the past 8 years.

The cost of child care is a massive roadblock for a lot of Australian parents who want to head back to work, or work more hours or more days.

Last year 73,000 people who wanted to work, didn’t look for work according to the ABS – because they couldn’t make child care costs work for them.

Right now, where both parents are working and have two or more children in child care, one parent can lose between 80 and 100 per cent of their take-home pay for working a fourth or fifth day each week. And those parents are overwhelmingly women.

If the cost of child care is almost what you earn for working a fourth or fifth day it’s no surprise that many Australian women decide it’s not worth it.

What we do here matters.

In 2005 female participation in the workforce was 57%. Today it’s 62%.

That’s an improvement, but the number hides an important fact.

Australian women are more than twice as likely as men to be in part time work because of caring responsibilities.

A typical Australian woman with children under 12 works two and a half days a week.

That’s paid work.

If we make child care cheaper it will make it easier for lots of women to work more paid hours and more paid days.

And that means they earn more now and have more superannuation when they retire. It’s good for careers and it’s good for families.

It’s also good for our economy.

Making child care cheaper isn’t welfare. It’s important economic reform.

It boosts participation. If you make child care cheaper, businesses get thousands of skilled workers back at work.

That’s good for business and good for productivity.

Treasury estimates that these measures will increase the hours worked by women with young children by up to 1.4 million hours per week in 2023-24.

That is the equivalent of up to an extra 37,000 full-time workers.

That makes a real difference for our economy. That’s families generating extra income. That’s building the careers and the retirement savings of Australian women.

That’s why we made cheaper child care a key part of our election campaign, and this Bill implements the promise we made to the Australian people.

It will make early education and care cheaper for approximately 1.26 million families.

Around 96 percent of families with children in early childhood education and care will be better off. None will be worse off.

Schedule 1 of the Bill sets out the increase in subsidies for families. From July 2023, families with a combined household income of $80,000 will receive a Child Care Subsidy up to 90 per cent for their first child in care.

Subsidy rates for families earning less than $530,000 a year will also increase.

 The rate of subsidy is tapered, reducing as household income increases.

These are real benefits for Australian families. A family on roughly the Australian median combined income of $120,000 with one child in care will save $1,780 in the first year of this plan.

For second and subsequent children five or under, this legislation retains the Higher Child Care Subsidy. This recognises the increased financial burden on families with multiple children in care and provides a subsidy of up to 95 per cent for eligible families.

I’m proud to say that the Bill also provides additional support for Indigenous Australian families in accessing early childhood education and care.

Schedule 3 of the Bill introduces a base level of 36 subsidised hours per fortnight for Indigenous children whether their families meet the activity test or not.

This is an important step in supporting education outcomes for Indigenous families. According to the 2021 Australian Early Development Census, two in five Indigenous children are developmentally vulnerable in one or more domains when they start school. That’s compared with one in five children who are from a non-Indigenous background.

Last year the proportion of Indigenous Australian children assessed as developmentally on-track in all five domains was 34.3 per cent. That’s a drop from 35.2 per cent in 2018, the first time this metric has gone backwards.

We need to turn this around.

That’s why we have included this measure in this Bill. It will help more Indigenous Australian children get access to early childhood education. 6,600 Indigenous families will benefit from these measures over the first year as their base level of subsidised hours increases from zero or 24 to 36 hours per fortnight.

And these measures will make it easier for other Indigenous families to access more early childhood education for their children, or to access it for the first time. We have developed this Bill listening closely to the advice of SNAICC – the Secretariat of National Aboriginal and Islander Child Care, who are tireless in advocating for improved access to early childhood education and care for Indigenous families.

The subsidy measures in the Bill commence on 1 July 2023, with the first payment in the Child Care Subsidy fortnight of the 2023-24 year commencing on 10 July 2023.

The previous government’s Higher Child Care Subsidy for families with multiple children policy included another measure which was to commence from July 2023. That measure reduced the period families could continue to access the Higher Child Care Subsidy for a child after their sibling left care.

That measure is forecast to save $34 million over four years. The problem is that the same measure is forecast to cost more than $89 million to implement.

That’s almost three times what it was meant to save.

That is an expensive saving. That measure is therefore removed in this Bill.

In its place, in Schedules 2 and 4 the Bill introduces measures to improve transparency and strengthen integrity within the early childhood education and care sector.

Schedule 2 increases transparency around large child care providers, helping families understand where their child care fees are going. The Bill requires large child care providers, regardless of the type of service they operate, to report financial information about revenue and profits to the Department of Education. This information can be made available online to families choosing a provider.

The Bill also strengthens the integrity mechanisms which underpin the sector.

Schedule 4 requires that payments of child care gap fees be made electronically. The gap fee is the amount a family must contribute to the cost of child care.

A requirement that these payments be made electronically will work together with existing record keeping obligations to help test whether gap fees have been paid. It will be a significant obstacle for fraudulent schemes where a service tries to claim a subsidy for care that isn’t occurring.

The Bill allows for exemptions to be made to provide flexibility around cash payments in exceptional circumstances. Over the coming months my Department will continue to engage closely with the sector on these provisions to ensure appropriate exemptions are in place in Minister’s Rules.

Schedule 4 also strengthens requirements that approved child care providers have good governance arrangements in place. The Secretary may also make rules for information that providers must report each week to receive subsidy payments from the Government.

Schedule 5 of the Bill supports our early childhood educators by confirming the Educator Discount agreed in 2021-22 Mid-Year Economic and Fiscal Outlook.

This will give child care providers the option of offering a discount on child care fees for the children of their educators, without this affecting the amount of Child Care Subsidy payable. This will support the retention and attraction of early childhood educators in the sector.

Schedules 6 to 8 of the Bill make minor amendments to improve or clarify the operation of Child Care Subsidy. These include clarifying the impact of gap fee waivers on the amount of subsidy payable, allowing discretion around the payment of subsidy for absences in exceptional circumstances, and extending time periods for services to pass on subsidy amounts to families in certain situations.

The Government has proposed that the Bill be referred for inquiry by the Senate Education and Employment Committee and I have foreshadowed this approach with the Shadow Minister for Education and the Shadow Minister for Early Childhood Education and Youth. I look forward to the report of the Committee.

This Bill is only one part of the Government’s work in supporting Australian families with young children.

Prior to the election we also announced that we would ask the Australian Competition & Consumer Commission to look at child care costs. Last week with the Treasurer, I announced that this Inquiry will kick off in January and

deliver its interim findings before 1 July to guide the implementation of this legislation. It will deliver its final report by the end of next year.

We will also task the Productivity Commission to conduct a comprehensive review of the early education and care sector with the aim of implementing a universal 90 per cent subsidy for all families. This review is expected to commence in the first half of 2023 with a final report in 2024.

I want to acknowledge and thank those who have had a hand in the creation of this Bill.

We have consulted with the sector through the Early Childhood Education and Care Reference Group and I want to thank all of these organisations for their insights in the drafting of this legislation:

  • The Secretariat of National Aboriginal and Islander Child Care;
  • Early Childhood Australia;
  • Goodstart Early Learning;
  • Early Learning and Care Council of Australia;
  • Australian Childcare Alliance;
  • Outside School Hours Care of Australia;
  • The National Out Of School Hours Services Australia Association;
  • Queensland Children’s Activities Network;
  • Community Early Learning Australia;
  • NSW Family Day Care;
  • NSW & SA In Home Care Support Agency;
  • KU Children’s Services;
  • Community Connections Solutions Australia;
  • Junior Adventures Group;
  • Early Learning Association Australia;
  • Family Day Care Australia;
  • Community Child Care Association;
  • Lady Gowrie Tasmania;
  • The Australian Local Government Association;
  • Outside School Hours Council of Australia;
  • TheirCare.

It’s important that we listen to the experts and that is what we have done.

Their feedback and advice have made this a better Bill.

My sincere thanks to my friend the Minister for Social Services, who crafted this policy in Opposition, and to my friend the Minister for Early Childhood Education and for Youth.

I also want to thank the Prime Minister. It is his vision and willingness to prosecute the case for greater investment both in female workforce participation and in our kids’ futures that has brought us to this point today.

As the Prime Minister said at the CEDA conference in this building a few weeks ago:

“Equality for women – in participation, in pay, in leadership opportunities, in financial security – is an essential precondition for Australia’s future economic growth.

A key part of this is re-framing the national conversation about child care, recognising its power and value as an economic reform.

An investment that benefits two generations of Australians, simultaneously:

1. Early education for a great start in life;

2. Flexible support for modern families;

3. And a multi-billion dollar boost to productivity and participation – without adding to inflation.”

That is what this Bill does. It’s good for our children. It’s good for families. And it’s good for our economy.