Mainstream and non-mainstream child care funding

The Government has recently outlined what are likely to be some key features of its new child care package in addresses by the Minister for Social Services, Scott Morrison, to The Sydney Institute and Early Childhood Australia Forum. If implemented, these measures would partially respond to the recent Productivity Commission report on future options for Early Childhood Education and Care (ECEC) in Australia. The Government is gradually revealing its response to that inquiry in the lead up to Budget 2015–16.

Overall, the Government is focused on two main objectives in child care: improving workforce participation (the ‘participation goal’) and improving access to early childhood education for disadvantaged children (the ‘social policy’ goal).

Two areas in which the Government’s intentions are now clearer is the future of child care subsidies to parents (Child Care Benefit (CCB) and Child Care Rebate (CCR)), and arrangements for disadvantaged families.

The future of Child Care Benefit and Child Care Rebate

The Government currently assists eligible families with child care costs through the payment of CCB, CCR, and Jobs, Education, Training Child Care Fee Assistance (JETCCFA). In 2014–15, CCB (a means‑tested benefit targeted toward low to middle income families) and CCR (a non‑means tested benefit that provides up to 50% of out-of-pocket costs after deduction of any CCB, capped at $7,500 per child, per year) account for 87% of the Government’s ECEC expenditure (at p. 116).

The Productivity Commission has recommended that the Government combine the current funding for these payments to support a single child-based subsidy (Early Care and Learning Subsidy), which would be available for children attending mainstream childcare services (Recommendation 15.1). The amount paid for each child would be calculated with reference to a means-tested rate (on a sliding scale between 85% for families with income ≤ $60,000 and 20% for families with income ≥ $250,000), applied to a benchmark price (based on the median hourly fees for the type of service and differentiating by age for children in Long Day Care (LDC)).

Minister Morrison told The Sydney Institute that he supports a single mainstream subsidy that targets low to middle income families. However, the Minister has rejected the benchmark method proposed by the Productivity Commission, due to concerns that it would produce a subsidy that is lower than the actual fees charged to a significant number of families across Australia. The Minister expressed a preference for a pricing method that better reflects child care fees while maintaining downward pressure on prices. This could include a deemed cost or average fee measure.

While we now know the Government supports the idea of a single means-tested mainstream subsidy, much of the detail–such as the means testing, benchmark pricing method and transition timeframe–is yet to be revealed. These are details which might ultimately determine the extent to which the new arrangements will help achieve the Government’s participation and social policy objectives.

Revised arrangements for disadvantaged families

At present, the Government provides specific supports for disadvantaged children and their families through the Special Child Care Benefit (a sub-category of CCB), Community Support Programme (CSP), the Budget Based Funded Programme and the Inclusion and Professional Support Program. The Productivity Commission has made recommendations affecting these three programs, including that the CSP should be replaced (Recommendation 10.3) with time-limited assistance aimed at encouraging services to become financially viable (Viability Assistance Program, Recommendation 15.8). The CSP promotes the establishment and maintenance of services in locations where they might otherwise not be viable or able to meet community requirements, with more than 2,100 providers receiving assistance in 2012–13.

The Early Childhood Australia Forum heard that the Government will introduce a separate (non‑mainstream) program that provides more targeted assistance to disadvantaged families and children. No details have yet been provided, so it is not clear which of the Productivity Commission’s recommendations might be adopted by the Government, and to what extent. The Minister has, however, emphasised that the Government intends to invest more in this area.

Ultimately, the foreshadowed measures are likely to represent the first of several significant changes to the Australian child care system. The Productivity Commission has made many recommendations in respect of which the Government has not yet announced its position (such as continued funding for universal access to a preschool program of 15 hours per week for 40 weeks per year, Recommendation 15.10). There are also a number of current reviews which, on completion, could affect the Government’s child care policies (White Paper on the Reform of the Federation; Review of the National Partnership Agreement on the National Quality Agenda for Early Childhood Education and Care). For those with an interest in child care, a longer term message from the Budget will simply be to ‘watch this space’.


Flagpost is a blog on current issues of interest to members of the Australian Parliament

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