Background Paper 9 1997-98
Social Policy Group
Major Issues Summary
The Role of Childcare
The Development of Childcare in Australia-1972 to 1996
Recent Developments-1996 to the Present
- Changes to Operational Subsidies
- Limiting of Childcare Assistance
- Cessation of Indexation of Childcare Assistance Fee Ceiling and Childcare Cash Rebate Ceilings
- Reduction of Childcare Cash Rebate Benefit to 20% for High Income Families
- Abolish Additional Income Allowed for Additional Dependent Children when Assessing Eligibility for Childcare Assistance
- Reduction in Income Cut-offs for Second and Subsequent Children for Childcare Assistance
- Tightening Up of Fringe Benefits Test when Assessing Eligibility for Childcare Assistance
- Changes to New Growth Strategy for Long Day Care Centres
- New Payment Arrangements for Childcare Assistance and Childcare Cash Rebate
- Funding for Consultation On Reform of the Childcare Assistance System
- Reform of School Age Care
- Tighter Targeting of Childcare Assistance
- Paying Childcare Assistance in Arrears
- Covering the Cost of Childcare for Participants in the Work for the Dole Scheme
- Increase In Number of Family Day Care Places
- Limiting via the Planning System the Number of New Private Childcare Places
Current Provision of Childcare Services
Long Day Care Centres
Family Day Care
Rural Multi-functional Children's Services
Multi-functional Aboriginal Children's Services
Mobile Children's Services and Toy Libraries
Childcare for School Aged Children
Government Assistance and Funding
A Brief Overseas Comparison
Some Current Issues
The Commonwealth first became financially involved with childcare in 1972. In that year $6.5m was provided for non-profit organisations to operate centre-based day care facilities for children of working and sick parents. Over the past three decades the childcare sector in Australia has grown to be a multi-billion dollar industry. There are 14 per cent of Australian pre-schoolers in day care compared to 6 per cent in the U.K and 23 per cent in the U.S.A. and in company with the U.K, Sweden and the Netherlands, there is no tax deduction for the associated costs. The formal sector in Australia cares for over 600 000 children under 11 years of age. The main age group using formal childcare services are three and four year olds and of this 'group' about 60 per cent utilise some form of care. At present, governments provide approximately 60 per cent of the $2.4b annual cost of providing this care.
In recent times the emphasis in childcare provision has moved from services for poorer, needy families to the provision of services to a wider range of clients, including non-working parents. At the same time there has also been an increasing emphasis on the 'educative' role of childcare primarily via stricter accreditation processes and an insistence on properly trained staff.
The rapid expansion of childcare services has been accompanied by an active debate as to just what is an appropriate level of government support for childcare and more generally just how the 'family' should be supported and assisted. There are essentially two schools of argument at either 'end' of the debate with most people holding views that fall somewhere between these two 'ends'. Some argue that government support should be restricted to poor and needy working families and that any other provision should be funded privately. As well, they argue that one of the reasons for the apparent 'breakdown of the family' is the 'overuse' of childcare. Advocates at the other 'end' of the debate argue that access to childcare is as important as access to health and education services and believe that places should be available, at reasonable cost, to all those who require it. It is further argued that high quality childcare often provides benefits to the children which they cannot get at home and that there are also attendant benefits to parents and society as a whole.
Commonwealth outlays on childcare services have been rising in line with the expansion of the system. The 1997-98 Budget allocated $1.134b to childcare with the bulk of the funding going to Childcare Assistance and the Childcare Cash Rebate. It is estimated that by 2000-2001 Commonwealth expenditure will rise to $1.307b. However, this increase in funding does not appear to allow for any 'real' funding increases as the growth in the system, which pushes up outlays on Childcare Assistance and the Childcare Cash Rebate, is outstripping any increases. For example, an expected funding increase of $46.8m over the period 1996-97 to 1997-98 is more than accounted for by increases in Childcare Assistance ($46.6m over the same period) and the Childcare Cash Rebate ($14.5m). In other words, the increase in total funding does not even fully cover the growth in the system let alone allow for qualitative improvements to the system.
Both the 1996-97 and 1997-98 Budgets contained a range of measures that were designed to achieve major savings in the childcare area. It would appear that the figures attached to these savings are calculated from the forward estimates published in the 1995-96 Budget. Using forward estimates as a basis for calculation is always a very problematic exercise but it does give an approximate indication of funding changes over the mid to late 1990s period. From the forward estimates contained in the 1995-96 Budget (when compared to the figures contained in the 1997-98 Budget Papers) it can be seen that $803m in savings are calculated to occur over the period 1996-97 to 1998-99. This figure would appear to be confirmed by the Commonwealth Department of Health and Family Services. In answer to a question during a recent Senate estimates committee hearing the Department indicated that a total of $851m of funding was estimated to be saved from the Family and Children's Services Program over the period 1996-97 to 2000-2001.
These funding changes have caused heated debate in the childcare sector and particular concerns have been expressed about the adequacy of the provision of services, increasing costs of childcare to families and providers and the effects the changes may be having on women who want to be, or remain, in the workforce.
Whilst unmet demand for additional childcare places has lessened in recent years there is still a substantial shortfall in the provision of services. According to Australian Bureau of Statistics there were in March 1996, 261 700 children under 12 years of age reported as being in need of additional formal care. Given that the Commonwealth is expecting to establish only an additional 83 000 places (catering for 136 000 children) over the period 1997-98 to 2000-2001 then it is likely that there will a substantial number of parents and carers who will not be able to access care or enough care.
Related to unmet demand is the issue of affordability. Recent surveys have indicated that fees at long day care centres have been increasing. For example, the National Association of Community Based Children's Services has found that weekly fees for community based child care had increased by an average of $18 since the beginning of 1997. A consequence of this may well be that parents will look for cheaper, poorer quality care or find it necessary to withdraw from childcare altogether.
The increasing cost of childcare is likely to have an impact on women in the workforce. Figures collected in September 1996 by the ABS found that more than 293 000 women were not actively looking for work, even though they would like to work, at least in part because of a lack of adequate childcare. Cost increases and a childcare system not keeping up with the demand for places is likely to exacerbate this trend.
The children of today are our nation's future. How these children are nurtured, developed and cared for will help determine what type of nation we are in the next century. One of the key services that helps develop and nurture many children (as well as helping support the family) is the provision of childcare. Given recent societal changes, including the changing role of women, it is perhaps timely to look at the current provision of childcare in Australia and attempt to assess its adequacy or otherwise.
Over the past three decades the childcare sector has grown to become a key component of the social and economic fabric in Australia. Originally designated as a limited program to help needy women and families, it has become a multi-billion dollar industry formally caring for over 600 000 children under 11 years of age or about 19 per cent of all children in Australia in that age grouping. Of three and four year olds, about 60 per cent utilise some form of care. The paid childcare sector now accounts for 0.5 per cent of GDP with governments providing approximately 60 per cent of the $2.4 billion cost involved with providing this care.(1)
This paper briefly analyses the role of childcare in our society, traces the development of childcare and provides details of the current provision of childcare services and assistance, including funding details. The final two substantive sections of the paper examine recent policy developments in the field as well as discussing some current issues relevant to the childcare sector. The main emphasis in the paper is on the involvement of the Commonwealth in the childcare sector, although the role of the States and Territories and the private sector is covered, albeit in a brief form.
When the Commonwealth first became directly involved with funding childcare in the early 1970s the emphasis was on the provision of services for needy, working families. The emphasis was on the 'care' of children whilst either or both of the parents were working. Since that time the philosophy and direction of childcare has changed more towards providing childcare services, at varying subsidy levels, to non-working and working parents and also to the less needy. As well, much of the childcare provision now, particularly in long day care situations, includes a strong 'educative' function which is supported by requirements relating to minimum qualifications for staff and accreditation of facilities.
There is still debate as to what is the appropriate role for governments in the provision of childcare and more generally as to how the 'family' should be supported and assisted. With respect to childcare some argue that government assistance should be restricted to poor and needy families and that the bulk of childcare should be a private enterprise function receiving only minimal government assistance. For others, government supported childcare provision should be available to all those who require it and therefore the current system should be expanded to cater for those who presently cannot get access to childcare.
Advocates of the former case usually refer to the need for children, wherever possible, to be cared for at home and it is often contended that one of the reasons for the apparent 'breakdown of the family' is the 'overuse' of childcare. The high cost of funding an extensive childcare system is also often put as a reason for limiting its availability. According to Mary Helen Woods, the National Vice President of the Australian Family Association, 'the social cost of a lack of pervasive and consistent parenting, due in no small part to the enforced absence of parents from the family home, is costing Australia dearly. How much longer will we refuse to connect the crippling burden of burgeoning social welfare payments with family breakdown? Until we make this connection, we cannot start to address the problem.'(2)
Advocates of the latter case argue that access to childcare is as important as access to health and education and accordingly it should be provided on as broad a scale as would cover all those who require it. Further they maintain that not only is well run and properly structured childcare of educational benefit to the children involved but there are also attendant social and economic benefits to children, their families and society as a whole. It is also argued that if the childcare is of a high quality then it is possible that the children may obtain some benefits they cannot get at home. Tricia Caswell, the then executive director of the Australian Conservation Foundation, has been reported as saying that institutional care was often better than home care because of the variety and choices of friends and activities it gave children.(3)
Academic and research opinion on the role and worth (or otherwise) of childcare is mixed with studies cited to support both of the sets of arguments outlined above. For example, prominent child psychologist Penelope Leach has put the view that children should not be placed in institutional care before they are three years old arguing that this is developmentally inappropriate for them.(4) Contrary to this Dr Gail Ochiltree, a lecturer in the Institute of Early Childhood at Macquarie University, has said that nearly all studies into this question have shown that childcare does not place children at a disadvantage even if they spend more than 20 hours a week in care before the age of one.(5)
The Commonwealth Government first became financially involved with childcare in 1972. In that year the Child Care Act 1972 provided funding ($6.5m for the first year) for non-profit organisations (including local government bodies) to operate centre-based day care facilities for children of working and sick parents. Funding was provided for capital grants, recurrent grants (to help pay qualified staff and provide for children in special need) and grants for research into matters relating to child care. To be eligible for this funding the centre-based long day care centres had to operate for at least 48 weeks a year and be open for at least eight hours every working day.
A marked change in the philosophical underpinning of the provision of childcare occurred in 1974. In that year the Commonwealth decided that childcare support should go to all children and not just to children from families that were poor or needy. The Commonwealth, also in 1974, broadened its assistance for new childcare services to include pre-schools. The mid 1970s also saw funding being increasingly provided for other forms of childcare including family day care, outside-school-hours care and playgroups. From the mid 1970s to the early 1980s the main expansion in childcare places was the provision of family day care. This philosophical change and the expansion of childcare services is largely explained by a number of broad societal changes which were occurring at this time-a growing feminist movement accompanied by more women entering the workforce, better education levels and growing demands across the board for more government involvement and funding in areas such as health, education and childcare.
Over the period 1983-85 the Commonwealth, in conjunction with the States and Territories, provided funding to allow an extra 6120 (5000 new centre-based long day care places and 1120 new outside school hours) places to be established in the system. Under these arrangements the Commonwealth and the States provided capital funding and the Commonwealth provided the recurrent funding for the new places.
In 1984 standardised fee relief for children in centre-based long day care centres was introduced. This fee relief, now called Childcare Assistance, is the main avenue through which the Commonwealth supports childcare. In the same year there was a move more towards a needs-based planning approach to the provision of new childcare places. Prior to this time funds had been allocated on the basis of submissions from community groups to the government, a practice that led to an inequitable distribution of childcare services.
Further expansion of the system occurred between 1985 and 1987. During that time approximately 11 000 new centre-based long day care places, 2400 occasional care places, 5650 family day care places and the cash equivalent of 1000 places for outside-school-hours places and various other program support was provided. These places were funded with a mixture of Commonwealth and State/Territory funding. In the middle of this period (1986) the funding formula for long day non-profit care centres was changed so that funding was provided on a per child basis as opposed to paying operational funding linked to staff costs. As well, fee relief was extended and limits were put on the fees charged. These changes saw the emphasis in funding go from operational subsidies to income-based fee relief.
In 1988 the Commonwealth announced the National Childcare Strategy which aimed at providing an extra 30 000 childcare places through cost-sharing agreements with the States and Territories. In 1990, the Strategy was expanded so as to allow for additional 50 000 places by the end of 1996-97. Another significant initiative in 1990 was the decision to extend fee relief (Childcare Assistance) to commercial childcare centres. This resulted in a major increase in the number of long day care places.
In 1994 the Commonwealth, via the New Growth Strategy, provided funds to local government and community organisations so as to increase the number of work-related child care places. That year also saw two other significant developments : the introduction of a Quality Improvement and Accreditation system which was aimed at improving the quality and standard of approved childcare and the introduction of the Childcare Cash Rebate (see earlier section on Government Assistance and Funding).
The 1995-96 Budget saw the announcement of an expansion of family day care places and extra places for outside-school-hours Care. Additional funding was also provided to the Supplementary Services Program.
Since the election of the Liberal/National Party Government in March 1996 a number of reforms to childcare have been, or are about to be, implemented. In general terms, the reforms undertaken have emphasised moves towards a greater reliance on means-tested childcare assistance as opposed to operational and capital assistance as well as a greater reliance on private providers of childcare services. One of the early initiatives of the new government was to announce a new National Planning Framework aimed at ensuring a more even distribution of childcare places and also at ensuring better access to childcare. Allied to this strategy is the development of a National Information Strategy that aims to ensure all the various participants in childcare in Australia are fully informed about current provision and related issues.
The main reforms announced in the context of the 1996-97 Budget were as follows:
Changes to Operational Subsidies
From 1 July 1997 operational subsidies for community-based long day care centres (excluding occasional care, family day care, multi-functional and multi-functional Aboriginal children's services) ceased. The main rationale for the withdrawal of this subsidy was that it 'would encourage community centres to be more efficient and cost competitive with the private sector' ...[and also]...'to remove inequities in Government assistance for families using private and community-based centres'.(6)Under this measure the Government also announced that additional funding would be provided to help community centres restructure and obtain financial and management advice prior to the subsidies being withdrawn. It was argued that any expected increase in fees charged as a result of the cessation of the subsidies could well be partly offset by community centres becoming more cost efficient. At the time it was estimated that the removal of the subsidies would save the Commonwealth $35.1m in 1997-98, $40.5m in 1998-99 and $41.7m in 1999-2000.(7)
Limiting of Childcare Assistance
This measure, implemented on 1 April 1997 limits Childcare Assistance to 50 hours per week per child. However, working families who can show that they have a genuine need for in excess of 50 hours of care per child can be exempted from this limit. This change to Childcare Assistance access is estimated to save approximately $30m in 1997-98 and approximately $33m in 1998-99.
Cessation of Indexation of Childcare Assistance Fee Ceiling and Childcare Cash Rebate Ceilings
This measure has the effect of freezing the levels of Childcare Assistance and Childcare Cash Rebate Fee Ceilings for two years. The indexation of these two forms of assistance was due on 1 April 1997 and 1 April 1998. It is estimated that, as a result of this measure, there will be savings of $17.5m in 1997-98 and approximately $31m in 1998-99.
Reduction of Childcare Cash Rebate Benefit to 20% for High Income Families
Implemented on 1 April 1997 this measure reduced the Childcare Cash Rebate from 30 per cent to 20 per cent for families with incomes above the Family Tax Initiative income cut off ($70 000 per annum for families with one child). Savings of approximately $10m in 1997-98 and $11m in 1998-99 are expected as a result of this measure.
Abolish Additional Income Allowed for Additional Dependent Children when Assessing Eligibility for Childcare Assistance
The aim of this measure is to simplify the income testing of Childcare Assistance and to align it with the income testing of the Family Payment. The measure was introduced on 1 April 1997 and means that families can no longer deduct $30 per week from their incomes for each dependent child under 16 when assessing their eligibility for Childcare Assistance. This change is expected to save approximately $22m this financial year and $24m in 1998-99.
Reduction in Income Cut-offs for Second and Subsequent Children for Childcare Assistance
This measure also took effect on 1 April 1997 and means that the income cut-offs with respect to eligibility for Childcare Assistance for families with two or more children have been reduced as follows-to $74 880 per annum for families with two children and $91 416 for families with three or more children. Approximately $4m this financial year and $4.5m next financial year is expected to be saved as a result of this measure.
Tightening Up of Fringe Benefits Test when Assessing Eligibility for Childcare Assistance
This measure extends the range of fringe benefits that are included in the income tests for Childcare Assistance and is due to come into effect on 1 January 1998. The savings expected from this measure are $100 000 in 1997-98 and $300 000 in 1998-99.
Changes to New Growth Strategy for Long Day Care Centres
The New Growth Strategy, which came into operation in 1994, is a Commonwealth initiative aimed at providing funds to local government and community organisations so as to increase the number of work related childcare places. This measure means that the Government will not proceed with uncommitted community based and employer sponsored centre-based places in the New Growth Strategy. Rather it will rely on the private sector to provide additional new centre-based care. Approximately $11m of capital funding over four years will however be retained to provide additional childcare places in rural areas. Expected savings are $28.8m in 1997-98 and $25.6m in 1998-99.
New Payment Arrangements for Childcare Assistance and Childcare Cash Rebate
From March 1998 both Childcare Assistance and the Childcare Cash Rebate will be paid by Centrelink (the new Commonwealth one-stop shop for the payment of benefits).
Funding for Consultation On Reform of the Childcare Assistance System
A small amount of funding ($500 000 in 1996-97 and $200 000 for each of the next three financial years) was provided under this measure to allow consultations to take place with all relevant players on a range of childcare issues, including the National Planning Framework, access guidelines and charging practices.
The latest Howard Government Budget also includes a number of important changes to existing childcare arrangements. The main changes announced were :
Reform of School Age Care
The main aim of this measure is to improve the access and affordability of low and middle income families to outside-school-hours care services. It is due to be implemented on 1 January 1998. The essence of the change is that school children who utilise outside-school-hours services will be provided with the same subsidies that are currently provided to families who utilise long day care services. The expected cost of this measure is $5m in 1997-98 and $5.1m in 1998-99.
Tighter Targeting of Childcare Assistance
As from 1 January 1998 there will be a limit of 20 hours per week on access to Childcare Assistance for each child utilising childcare for non-work purposes. The expected savings from this measure are $4.4m this financial year, $16m in 1998-99 and $25.4m in 1999-2000.
Paying Childcare Assistance in Arrears
The change to paying Childcare Assistance fortnightly in arrears (it currently is paid in advance) from 1 January 1999 will bring the payment of Childcare Assistance into line with other assistance that will be paid out by Centrelink. This measure is expected to save $32.5m in 1998-99 and $3.1m in 1999-2000.
Covering the Cost of Childcare for Participants in the Work for the Dole Scheme
Under this measure childcare costs for the children of participants in the Work for the Dole Initiative will be met by the Government. The measure is expected to cost $500 000 in 1997-98 and $100 000 in 1998-99.
Increase In Number of Family Day Care Places
This important initiative is aimed at providing a further 500 additional day care places in 1997-98 and 1998-99 and an additional 750 places in 1999-2000 and 2000-2001. The main aim of the measure is to increase the number of day care places in rural and remote areas where the supply of private childcare places is limited. The expected cost of the measure is $700 000 in 1997-98, $1.7m in 1998-99 and $3.3m in 1999-2000.
Limiting via the Planning System the Number of New Private Childcare Places
Under this measure there will be a limit placed on the number of new private sector places in long day care centres in 1998 and 1999. In effect, it means that in 1998 and 1999 the number of new private childcare places eligible for Childcare Assistance will be restricted to 7000 per annum. It is estimated that savings of $212m over four years will be achieved as a result of this measure.
There are a number of different types of childcare which are outlined below. The bulk of childcare provision is for children below school age but there is also provision of services to children in primary schools.
As well as the formal types of childcare listed below there is also an informal sector which caters for nearly twice as many children as does the formal sector. Informal care is non-regulated care that usually occurs in a private home. Informal care is typically provided by relatives and friends and may be paid or unpaid, for example, some informal care provided by nannies, relatives, friends etc. is supported by the Childcare Cash Rebate if the providers of the care register for the Rebate and meet the eligibility criteria-see section on government assistance and funding (p. 12). As at March 1996 there were 624 400 children under 12 years of age utilising formal childcare services and 1 128 300 children in informal care.(8)The key focus in this paper is with the formal childcare sector.
Long day care centres are generally open for at least 8 hours on each working day. They tend to be purpose-built facilities that provide childcare to children under school age. They are subject to relevant State/Territory legislation and must have a licence to operate. A variety of ownership/management models are found in this form of childcare including private operators, religious bodies, local councils, community organisations, employers, non-profit cooperatives and other non-profit services such as hospitals and TAFE institutions. As well as the requirements of being licensed and having to be open for at least 8 hours per day these centres, to be eligible for Commonwealth Childcare Assistance, must also be registered with the National Childcare Accreditation Council and be involved in the Quality Improvement and Accreditation System. The care provided in these centres can be on a full-time, a part-time or on a casual basis. As at March 1996, average full-time fees charged per week by Commonwealth-funded long day care centres ranged between $130 and $166.(9) Families using registered centres are eligible to apply for the Childcare Cash Rebate.
Family day care is care given in a home environment with the providers being part of a scheme that is supported and managed by a central non-profit coordinating unit. Family day care is mainly designed to cater for children under school age but it also does cater for school age children. A key advantage of this type of care is its flexibility and it can include long day care, occasional care, part-time care, before and after school care, emergency care and vacation care. The extent of licensing and regulation of family day care schemes varies from State to State. Families using Commonwealth approved family day care services are able, if eligible, to access Childcare Assistance and/or the Childcare Cash Rebate.
This type of care is centre-based and is provided on a sessional or hourly basis to allow parents and carers access to care for short periods of time. Unlike other forms of Commonwealth sponsored care, occasional services are not subject to 'priority of access' guidelines (which essentially gives priority to children of working parents and to children with special needs) since it is not the intention that such services are primarily for working parents. Both Childcare Assistance and the Childcare Cash Rebate are available to eligible families using Commonwealth approved centres. These centres must be licensed by the relevant State or Territory.
Pre-schools are also referred to as kindergartens in some States. They essentially provide services to children in the year prior to attending primary school and involve structured, sessional programs for two or three days a week. The primary responsibility for establishing and providing ongoing funding for pre-schools rests with the States but Commonwealth approved pre-school users are able, if eligible, to access Childcare Assistance and the Childcare Cash Rebate. A distinguishing feature of pre-schools that differentiates it from other forms of childcare is that they usually only operate during the school term. As well, most pre-schools are required to have a qualified teacher on the staff.
The Commonwealth has established a number (14 as at June 1996) of multi-functional services in rural areas that provide a range of different childcare services (for example, long day care, family day care, outside school hours care and vacation care) for children aged 0 to 12 years in the one facility. These facilities must be registered with the relevant State or Territory authority and because of their rural 'disadvantage' obtain additional operational support from the Commonwealth. Users, if eligible, are able to access Childcare Assistance and the Childcare Cash Rebate.
These services are similar to those provided by the rural multi-functional centres described above but also include various cultural programs appropriate to the needs of Aboriginal and Torres Strait Islander children. As at June 1996, there were 37 Multi-functional Aboriginal Children's centres in operation. Users, if eligible, have access to Childcare Assistance and the Childcare Cash Rebate.
Playgroups are usually community-based groups that allow parents and their children to share activities and experiences. They are often set up through local government and community agencies and, although users are not eligible for Childcare Assistance and the Childcare Cash Rebate, playgroups do receive some Commonwealth funding and support.
These services are in remote areas and provide occasional care, vacation care as well as playgroups, games and toy libraries. The Commonwealth provides recurrent funding for these services but again, there is no entitlement to Childcare Assistance and the Childcare Cash Rebate.
Childcare for school aged children takes several forms, the main ones being family day care (see above) and outside-school-hours and vacation care. These latter forms of care are generally located close to primary schools and provide a range of activities as well as time for rest and homework. The service can be provided on regular or casual basis and some school aged care is provided in long day centres. Childcare Assistance (but generally not to private services) and/or the Childcare Cash Rebate are available to eligible parents.
Table 1 indicates the distribution of children below 12 years of age by type of formal care used as at March 1996. It can be seen from the Table that the main types of care in terms of usage (in descending order) are pre-school, long day care, before and after-school care and family day care.
Table 1 : Number of Children In Formal Care by Type ('000)-March 1996
Before/After School Care 111 700
Long Day Care Centre 177 700
Family Day Care 96 200
Occasional Care 52 400
Preschool 200 600
Other Formal Care 22 200
TOTAL 624 400
Source: ABS, Childcare Australia, Catalogue No. 4402.0, Canberra, ABS, 1996.
The size and importance of the childcare sector can be judged from the fact that in 1996-97 about $1.5b was provided for childcare by governments throughout Australia-$1.1b by the Commonwealth and approximately $400m by the States and Territories.(10)
In the most recent Commonwealth Budget $1 133.6m was allocated to the childcare sector. The growth of the sector can be illustrated by the following figures-Commonwealth expenditure (in real terms) on children's services increased from $249.1m in 1987-88 to $597m in 1993-94.(11) The growth in Commonwealth-funded places has also grown substantially over the period-from 137 100 in 1988 to 396 700 in 1994.(12)
Table 2 shows the amounts budgeted for 1996-97 and 1997-98 as well as the forward estimates for the financial years out to 2000-2001. It can be seen that the biggest item of expenditure on childcare is Childcare Assistance followed by the Childcare Cash Rebate. Operational subsidies are paid to family day care services and outside-school-hours care services to help with the general costs of running childcare services. Until 1 July 1997 these subsidies were also paid to community-based long day care centres and from the end of 1997 they will also cease to be paid to outside-school-hours services. These policy changes explain the significant drop in the amount allocated to operational subsidies in the 1997-98 budget. The level of capital funding will decline in the later years (see Table 2) in line with the completion of the joint National Childcare Strategy. The 'Other' category includes programs to cater specifically for children with special needs, program support and the Accreditation process-see below for further details. The Table clearly shows that the main reason for increasing expenditure on childcare is related to growth of the system-as the number of children in care increases, outlays on Childcare Assistance and the Rebate also increase. For further discussion of general funding matters see the section on Funding (p. 19).
Table 2 : Childcare - Outlays by Funding Type
1996-97 1997-98 1998-99 1999-00 2000-01
Budget Estimate Estimate Estimate Estimate
$m $m $m $m $m
Childcare Asst. 718.8 765.4 801.7 891.2 956.2
C'Care Cash 131.0 145.5 145.2 153.5 167.6
Operational 143.4 98.1 89.8 97.7 99.2
Jobs Education 9.8 11.4 11.3 11.3 11.5
Program - Sole
Capital Funding 15.3 28.0 18.7 12.2 2.2
Other 68.5 85.2 75.1 69.9 70.5
TOTAL 1,086.8 1,133.6 1,141.8 1,235.8 1,307.2
Source: Budget Paper No.1, 1997-98
In more detail, the main types of childcare assistance and support are as follows :
Childcare Assistance is a means-tested payment, paid by the Commonwealth since 1984, that allows fees to be reduced for parents that have their children cared for in long day care, family day care, occasional care, outside-school-hours care and some pre-schools. It is paid directly to the service provider who then reduces the fee paid by the appropriate amount. This form of assistance is the main Commonwealth contribution to childcare with an expected $765m (65 per cent of total Commonwealth support) to be spent in 1997-98.(13) By way of comparison only approximately $289m was provided for Childcare Assistance in 1991-92.
To be eligible for Childcare Assistance a service must comply with various requirements including being licensed by the relevant State/Territory authority, complying with the relevant administrative guidelines and practices and providing places in accordance with the Priority of Access Guidelines.
These latter guidelines ensure that first access to vacant childcare places go to children (in descending order of priority):
- of working parents
- who are disabled or who have parents with a disability
- who have a serious risk of abuse or neglect
- of parents at home with more than one child below school age, or
- who have a single parent at home.
At present, a family with a combined income of less than $27 144 per annum is eligible for up to $95.50 per week in Childcare Assistance if they have one child in care for 50 hours per week. Families with more than one child receive additional support. However, the level of assistance decreases as incomes rise (and also if hours used falls below 50) from this base level. For families with one child, assistance cuts out altogether at $65 743. For families with two children the upper level income cut off is $77 084 per annum. Families with three or more children receive additional assistance.(14)
Families receiving Childcare Assistance also have to pass an assets test which essentially means that families with assets of less than $406 000 (not counting the family home) are eligible for assistance. Higher assets limits apply to low income families, families with more than one child and families with a low level of liquid assets.
This Rebate, introduced in 1994, is payable directly to the family and is only partially means-tested. It is paid to help families meet the cost of work-related care expenses for dependent children under 13 years of age (higher in some special cases). To be eligible, the service provider must be registered with the Health Insurance Commission and claims are made through Medicare offices.
All families must pay the first $19.50 per week of the cost of their childcare irrespective of the number of children they have in care. Once this is taken into account they are eligible for a Rebate of 30 per cent or 20 per cent of the remaining cost of care (minus any Childcare Assistance) depending on their family income. Upper limits are placed on the maximum amounts that can be paid-$115 per week being the upper ceiling for one child and $230 per week being the upper ceiling for two or more children. Families with incomes of less than $70 000 per annum (adjusted up by $3000 for each child after the first) can claim the full 30 per cent Rebate whilst those on incomes above this are eligible for the 20 per cent Rebate.(15)
From March 1998 it is intended that the Childcare Cash Rebate (to be renamed the Childcare Rebate) will be paid through the new Commonwealth Services Delivery Agency.
In the most recent budget $145.5m was provided for funding of the Childcare Cash Rebate. In 1994-95 approximately $90m was provided for the Rebate.
Special Services and Program Support
The Commonwealth funds two special programs designed to help families who have children with special needs. Since 1983 the Supplementary Services Program (SUPS) has been helping childcare services to provide access to children with additional needs such as children with disabilities, Aboriginal and Torres Strait Islander children or children from diverse cultural and linguistic backgrounds. The SUPS Program provides funding for staff who offer free support and training for childcare workers. A complementary but separate program-The Special Needs Subsidy Scheme (SNSS)-was established in July 1997. The SNSS enables children with severe disabilities or traumatised refugee children to participate equally in mainstream childcare programs. Funding is available for ongoing additional staffing, advice, training and specialised resources and/or equipment needed for children with special needs.
Program Support refers to the funding made available by the Commonwealth to the various childcare organisations in the States and Territories to help with training, resources and advice in relation to childcare matters.
Total budget funding for Special Services and Program Support (including the accreditation process) was $85.2m in 1997-98.
Jobs, Education and Training Program (JET)
The JET Program is designed to assist JET clients (mainly sole parent pensioners) to enter or re-enter the workforce via the provision of childcare, training and employment opportunities.
A total of $11.4m was allocated to this program in the 1997-98 budget.
Commonwealth funded community-based and private long day care centres, family day care coordination units and outside-school-hours care services are all eligible for sales tax exemptions. As well, exemption from the Fringe Benefits Tax is available to employers who provide childcare for their employees.
Grants To Non-Profit Community Based Services
A range of grants and other support is available to non-profit, community-managed childcare services. These include :
Capital Grants: aimed at assisting new non-profit childcare centres developed under the National Child Care Strategy ($28m in 1997-98).
Operational Subsidies: currently paid to family day care services and out-of-school-hours services. As from 1 January 1998 the subsidy for out-of-school-hours services will cease. This will be partly offset by a more generous arrangement for School Age Childcare Assistance from that date. Operational subsidies are designed to help with the general costs of operating a childcare service. A total of $98.1m has been budgeted for operational subsidies in 1997-98, down from $143.4m in 1996-97.
Financial/Management Advice: is available to community centres and outside-school-hours services to help offset the loss of the operational subsidy. The aim is to help centres become more efficient and restructure their service provision. Funding in this area will cease at the end of the 1997-98 financial year.
Establishment Grants: are provided as one off grants to new family day care (and outside-school-hours services from 1 January 1998) services to enable them to employ an experienced staffer to perform the necessary tasks that need to be done prior to opening.
Set Up Grants: are available to newly approved family day care and outside-school-hours care services. They are one-off payments to help with costs such as insurance and telephones.
Additional Capital Assistance: is available for urgent capital works, for the upgrading of small centres to help ensure viability and to help maintain and upgrade old childcare centres.
Disadvantaged Area Subsidy: this subsidy has been available from 1 July 1997 to relevant community centres in rural and remote locations to help families to continue to access work-related childcare. This subsidy will also become available to outside-school-hours services from 1 January 1998.
Regional Travel Assistance Grants: are provided to help rural and remote family day care services overcome the extra costs (such as travel) of living in those areas.
Disabled Supplementary Services Payment: are payments made to carers in family day care schemes who have the responsibility of caring for a child or children with a disability. The level of the payment depends on the level of the disability concerned.
State/Territory Pre-School Funding/Other Support
Approximately $300m per annum is provided by the States and Territories to fund pre-school (with the exception of pre-schools for Aboriginal and Torres Strait Islander children which are funded by the Commonwealth) services. The States and Territories also provide a range of other childcare programs and contribute to areas such as the cost of inspecting premises under licensing arrangements.
Local Government Support
Most local governments are involved with setting up and running childcare services including community-based long day care centres, family day care services, occasional care services and outside-school-hours services. They also help offset the costs of providing childcare primarily through the contribution of land and administrative support.
Table 3 briefly compares childcare funding and services in Australia with seven other industrialised countries. Whilst the only comparative figure refers to the proportion of pre-schoolers in each jurisdiction that are in day care, it nevertheless gives an approximate indication of the scope of services in each country. In terms of pre-school coverage it shows that Australia is in the mid range with 14 per cent of pre-schoolers in day care and in the company of the U.K, Sweden and the Netherlands in allowing no tax deduction for childcare costs. The Table also shows that the majority of countries surveyed have a mixed (public and private) system of provision and have a funding match based on various subsidies and fees. It is interesting to note that four countries allow childcare costs as a tax deduction whilst the other four do not.
Table 3 : Childcare funding and services in eight industrialised countries, 1990-1993
Country Model of Funding % of Tax
responsibility pre-schoolers deduction
in day care
Australia Mixed Subsidies for 14% No
& parental fees
Canada Mixed Subsidies for 18% in Yes
low-income parents licensed
& fees care
France Public Payroll taxes & 25% under 3 Yes
general revenue & years; 95%
parental fees 3-5 years
Germany Mixed/public 90% taxes; 10% 2% under 3 Yes
parental fees years; 75%
Netherlands Mixed Subsidies for 11% under 3 No
low-income families years; 50%
& fees 3 years; 90%
Sweden Public Payroll taxes & 73% under 6 No
income fees & years
United Social welfare Subsidies for 1% in public No
Kingdom model/private low-income families centres; 5%
& fees in family
United States Private/mixed Subsidies for 23% in Yes, in 50%
low-income families centre care; of states;
& fees 70% 3-5 EITC for
Source: Adapted from Canadian family policies: cross-national comparisons, Professor Maureen Baker, University of Toronto Press, 1995.
While it is true that overall Commonwealth funding for childcare has risen in recent years and is forecast to continue to rise each year through to the next century (see Table 2) the additional funding provided does not cover the growth in the system or provide for any real funding increases. For example, the funding increase of $46.8m over the period from 1996-97 to 1997-98 (see Table 2) is more than accounted for by increases in Childcare Assistance ($46.8m) and the Childcare Cash Rebate ($14.5m). In other words, the growth in the system (estimated to be 27 100 new places in 1997-98), which pushes up outlays on Childcare Assistance and the Cash Rebate, is outstripping (by approximately $12m in 1997-98) the overall funding increase. This differential is estimated to be even larger if the 1997-98 to 1998-99 period is looked at. Over these two years, total Commonwealth funding is estimated to increase by $8.2m but at the same time total funding for Childcare Assistance (the funding for the Rebate is estimated to remain the same) is likely to rise by $36.3m.
The section on the 1996-97 and 1997-98 Budgets illustrated how the Government has introduced policies in the last two years that are designed to achieve major savings in the childcare area. It would appear that the figures attached to these savings are calculated from the forward estimates published in the 1995-96 (ALP) Budget. While using forward estimates is always very problematic, it is one way of getting a very approximate indication of funding changes over the period in review. From the forward estimates contained in the 1995-96 Budget (when they are compared to the figures in Table 2) it can be seen that $803m in savings are calculated to occur over the period 1996-97 to 1998-99. This figure would appear to be confirmed by the Department of Health and Family Services. In answer to a question put during a recent Senate estimates committee hearing the Department indicated that a total of $851m of funding was estimated to be saved from the Family and Children's Service Program over the period 1996-97 to 2000-2001.(16)
Whilst there has been a rapid expansion of the childcare sector over the last two decades this expansion has not been enough to keep up with the demand for services.
Table 4 shows how childcare places have expanded over the period 1991 to 1996.
Table 4 :Growth in Childcare Places by Service Type
Service Type 1991 1993 1995 1996
Employer 4 404 7 000 11 300 12 800
Community Based LDC 41 086 43 000 44 600 45 600
Family Day Care 42 950 45 400 54 000 60 100
Out School Hours Care 44 974 48 900 64 000 71 800
Private Long Day Care 32 296 51 300 88 600 109 700
Source: Childcare - an uncertain future, Celia Haddock, Secretary, National Association of Community Based Children's Services in Impact (April 1997), p. 1.
Un-met demand for additional childcare places has lessened in recent years but there is still a substantial shortfall in the provision of childcare services. According to Australian Bureau of Statistics figures there were, in March 1996, 261 700 children under 12 years of age reported as being in need of additional formal care. The comparable figure for June 1993 was 489 200. (17)The reduction in the amount of un-met demand is largely due to the expansion of Commonwealth funded places over the equivalent period-between June 1993 and March 1996 the number of such places increased from 196 000 to 301 000.(18)
However, unless there are substantial changes in the level of demand for childcare in the foreseeable future, it is unlikely that the parents and carers who want additional childcare services will have their needs met. The Commonwealth is expecting to establish only an additional 83 000 places (catering for 136 000 children) over the period 1997-1998 to 2000-2001.(19)
Directly related to the level of un-met demand for childcare services is the issue of affordability. In recent times there would appear to have been a general increase in childcare fees at long day care centres across Australia. This increase has been caused, according to some observers, by recent policy changes and particularly the abolition of operational subsidies for these centres from 1 July 1997. For example, a recent survey of 1084 community long day centres undertaken by the National Association of Community Based Children's Services, found that weekly fees for community-based childcare had increased by an average of $18 since the beginning of 1997.(20)The survey also found that fees in some of the States were as high as $190 per week and that the average fee for one child per week in these centres in NSW, Victoria, South Australia and Tasmania was $170. As well, 73 per cent of families who said that they were taking their children out of community-based care gave, as their reason for this decision, the increased cost of the care and 74 per cent of families who said that were staying with their centre, indicated that fees were likely to be increased again in the near future. The Association is not only concerned that the increasing fee levels will see childcare becoming unaffordable for some families but it also believes that the quality of care in many of the community centres is under threat. The survey indicated that 25 per cent of centres had reduced staffing levels and some had replaced experienced staff with junior staff and drastically reduced spending on toys and equipment.(21)
If this survey is indicative of what is happening in the community-based centres then it is likely that there will be a reduced demand for such services and some people, particularly women, could be forced out of the paid workforce in order to care for their children. Another effect of increasing fees for community-based long day care may well be to transfer demand for childcare services from the formal and regulated sector to the informal and less well regulated sector. This would see the overall level of quality in the sector decline with consequent 'spread on' effects in terms of how children in care grow, develop and learn.
One of the apparent effects of the increasing cost of community-based long day care is that some women who would like to enter or remain in the workforce are being forced out of the labour market. Even before some of the major changes to the childcare sector made in the past 18 months came into effect, it was evident that the provision of services was not sufficient to meet demand. A survey undertaken by the Australian Bureau of Statistics showed that more than 293 000 women were not actively looking for work, even though they would like to work, at least in part because of a lack of adequate childcare.(22)
It is possible that the number of women in this situation has increased since these statistics were collected in September 1996. From 1 July 1997 operational subsidies to community-based long day care centres ceased and this is the main reason given by the National Association of Community Based Children's Services for the fee increases. The view that increasing childcare costs are having a deleterious impact is supported by the President of the ACTU (Jennie George). It has been reported that Ms George believes women are being forced out of the workforce because of the increasing cost of childcare or they were moving their children to inferior, unregulated care.(23)
As many of the recent changes to childcare funding and policy have yet to make a full impact it is difficult to accurately assess just how these changes will impact on women in general, and in particular women in the workforce. It may be some time before such an assessment can be made.
This paper has given an overview of recent developments and the current provision of services for childcare in Australia. Some substantial issues such as just what is an appropriate role for governments in the provision of childcare services and to what extent childcare fulfils a welfare rather than an education function are only briefly alluded to here. These would be useful topics for future consideration. So too would a detailed look at the situation pertaining in relevant overseas jurisdictions.
It is clear that the active debate on childcare provision that has been ongoing now over several decades will continue with even greater intensity as we move towards the end of the 1990s. The challenge for governments will be to respond to the many conflicting demands in the debate and arrive at policy outcomes that broadly reflect mainstream views on childcare.
- Economic Planning Advisory Commission, Future Child Care Provision in Australia, Final Report, November 1996, p. 12.
- Australian Financial Review, 1 May 1996.
- The Australian, 30 March 1994.
- The Australian, 29 March 1994.
- The Sydney Morning Herald, 30 March 1994.
- Department of Health and Family Services, Portfolio Budget Statements 1996-97, p. 180, 181.
- ibid., p. 180.
- ABS, Childcare Australia, Catalogue No. 4402.0, Canberra, ABS, 1996.
- The Australian Institute of Health and Welfare, Children's Services in Australia 1996, p. 28.
- Economic Planning Advisory Commission (EPAC), op. cit., p. 15.
- Australian Institute of health and Welfare, Australia's Welfare Services and Assistance 1995, AGPS Canberra 1995, p. 127.
- ibid., p. 133.
- The Commonwealth Department of Health and Family Services, Planning to Succeed in Childcare: National Childcare Information Strategy, September 1997, Section 12.
- ibid., Section 13.
- ibid., Section 14.
- Community Affairs Legislation Committee, Examination of Budget Estimates 1997-98, Additional Information Received, Volume 8 (October 1997), p. 10.
- ABS, op. cit.
- EPAC, op. cit., p. 11.
- Commonwealth Department of Health and Family Services, op. cit.
- As reported by Michelle Gunn, The Australian, 23 September 1997.
- ABS (1996), Persons not in the labour force, Catalogue No. 6220.0.
- The Age, 15 May 1997.
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