Early childhood education and care

Budget Review 2015–16 Index

Monika Sheppard

In the Budget, the Australian Government has responded to the Productivity Commission’s Inquiry into Childcare and Early Childhood Learning.[1] The existing child care system will be reformed, with a new system implemented from 1 July 2016 to 1 July 2017. The budget measures providing for the new system are set out in the Government’s $4.4 billion Families Package and funding from existing programs will be absorbed into the new program structure.[2]

The Families Package also includes continued funding to support the objectives of national partnership agreements (NPAs) that aim to enhance early childhood education and care (ECEC).

Families Package—key child care measures

A single Child Care Subsidy for mainstream services

Currently, the Australian Government provides financial assistance to eligible families to assist with the costs of child care via the means tested Child Care Benefit, the non-means tested Child Care Rebate, and the Jobs, Education and Training Child Care Fee Assistance programs. From 1 July 2017, these programs will be replaced with a single means tested Child Care Subsidy (CCS).

The CCS will cover 85 per cent to 50 per cent of eligible families’ actual or benchmarked fees (whichever is the lower). The maximum subsidy (85 per cent) will be provided to families with an annual income of $65,000 or less and the subsidy rate gradually tapers to 50 per cent for families earning around $170,000 or more. A cap of $10,000 in CCS per child, per year for families earning more than $185,000 annually will apply. Eligibility criteria include that families satisfy an activity test, with the number of subsidised child care hours dependent upon the number of hours spent in work, study, training or recognised volunteering each fortnight. Families earning below $65,000 annually, who do not meet the activity test, will be subsidised for up to 24 hours of child care each fortnight, while those who receive income support payments with participation requirements (for example, Newstart Allowance) will have their level of participation recognised under the activity test.[3]

Since the Productivity Commission (PC) recommended a single means tested child care subsidy, much of the child care funding debate has focussed on how the rate of the subsidy would be calculated. Initial concerns regarding the hourly benchmark rate appear to have been resolved, with the Government adopting a higher rate—based on a projected average price plus additional loading for different service types—than that proposed by the PC, which was based on a median price for the relevant service type.[4] The benchmark is intended to exert downward pressure on child care fees (by capping the level of subsidy available).[5] However, Ben Phillips from the National Centre for Social and Economic Modelling warns that the long-term impact of the Government’s significant investment in child care expenditure will be inflation in child care prices.[6]

Some in the ECEC sector have expressed concerns that the activity test will prioritise workforce participation objectives over the best interests of children.[7] For example, Early Childhood Australia has argued that ‘it is often the children whose parents aren’t working that benefit the most from access to quality early learning’.[8] The proposed activity test is designed to closely align the level of government assistance with parents’ level of work participation, while retaining some level of support to all families (as well as targeted support for disadvantaged and vulnerable groups). Minister for Social Services, Scott Morrison, has stated that ‘support for child care is not a welfare payment. It is a payment that makes the cost of child care affordable for families who need to be in work and choose to be’.[9]

Child Care Safety Net for non-mainstream services

A new Child Care Safety Net program will be established to provide targeted support to disadvantaged or vulnerable families who encounter barriers to accessing child care. The new measure will partly replace the existing Inclusion and Professional Support Programme with a new Inclusion Support Programme from 1 July 2016; the existing Special Child Care Benefit with an Additional Child Care Subsidy from 1 July 2017; and the existing Community Support and Budget Based Funded programs with a new Community Child Care Fund from 1 July 2017. Some funding for these existing programs will be redirected to the Safety Net and the CCS.[10]

The Safety Net will have total funding of $869 million over three years: the Additional Child Care Subsidy ($156 million over two years), the Community Child Care Fund ($304 million over two years) and the Inclusion Support Programme ($409 million over three years).[11] In general, this measure is consistent with PC recommendations aimed at reforming child care services for families with additional needs, although the PC recommended funding for operational capital costs be time-limited.[12]

Uncertainty of the additional funding

The Budget provides additional funding of $3.5 billion over the forward estimates: $3.2 billion in respect of the CCS and $327.7 million in respect of the Safety Net.[13] This funding has been welcomed across the ECEC sector as an acknowledgement of the importance of investing in ECEC.[14] However, the Government has linked the additional funding with Family Tax Benefit savings measures announced in the 2014–15 Budget which have stalled in the Senate.[15]

The Opposition, the Greens and most crossbench senators have warned that they will not support cuts to family payments to fund the child care measures, particularly Family Tax Benefit Part B (FTB-B), which provides support to single parent and single earner families.[16] Some Nationals senators have signalled their opposition to the FTB-B cuts and that their support for the child care measures is contingent on more financial support for stay-at-home parents.[17]

A pilot program for in-home services

The Budget provides $246 million for an Interim Home Based Carer Subsidy Programme (Nannies Trial), a two-year pilot, commencing 1 January 2016, that extends child care fee assistance to in-home care provided by nannies.[18] The pilot targets families who are not able to access mainstream child care services, such as emergency services and shift workers, and is expected to subsidise the cost of 4,000 nannies providing care to 10,000 children.[19] Eligible families with income up to $60,000 will receive subsidies worth 85 per cent of the capped hourly rate ($7 per hour, per child), with the subsidy rate tapering to 50 per cent of the capped rate for families with income up to, and above, $165,000. Families with income over $250,000 per annum will not be eligible. With the typical hourly rate for nanny services estimated to be between $20 to $35 per hour, and the subsidy providing only a percentage of $7 per hour, the cost of nanny services is likely to remain prohibitive for many families.[20]  

National Partnership Agreements

The key ECEC NPAs are those for the National Quality Agenda for Early Childhood Education and Care (NQAECEC) and Universal Access to Early Childhood Education (UAECE). The Budget provides $61.1 million over three years from 2015–16 to continue the Government’s support for implementation of the National Quality Framework (NQF), and $843 million under the UAECE NPA for the 2016 and 2017 calendar years was previously announced.[21]

The NQAECEC NPA provides a national system for the regulation and quality assessment of ECEC services. The NPA was reviewed in 2014—the final report may impact government funding in the next budget, as well as state and territory funding allocations which are yet to be determined for 2015–16 and over the forward estimates.[22]

The UAECE NPA is aimed at providing universal access to quality early childhood education programs for all children in the year before full-time school for 600 hours per year.[23] While the 2015–16 Budget provides clarity for the short-term, the long-term future of the Australian Government’s funding for preschool programs is unclear. 

[1].          Productivity Commission (PC), Childcare and early childhood learning, Inquiry report, 73, PC, Canberra, 2014.

[2].          Australian Government, Budget 2015–16: families package, p. 4.

[3].          T Abbott (Prime Minister) and S Morrison (Minister for Social Services), Jobs for Families child care package delivers choice for families, media release, 10 May 2015; Budget 2015–16: families package , op. cit., p. 7.

[4].          T Abbott and S Morrison, op. cit.

[5].          Ibid. See also: S Morrison (Minister for Social Services), Address to Early Childhood Australia Forum, speech, 16 April 2015.

[6].          L Wilson, ‘Federal Budget 2015: Mums who volunteer can keep childcare’, Newscorp Australia Network, 14 May 2015.

[7].          Early Childhood Australia, Working families to benefit from historic reform of early childhood education and care subsidies, media release, 10 May 2015; Goodstart Early Learning, Families package great for working families, needs to work for all children, media release, 10 May 2015.

[8].          Early Childhood Australia, op. cit.

[9].          T Abbott and S Morrison, op. cit.

[10].       Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 155; S Morrison (Minister for Social Services), Abbott Government delivers child care safety net for disadvantaged families, media release, 8 May 2015.

[11].       Budget 2015–16: families package, op. cit., p. 8; Abbott Government delivers child care safety net for disadvantaged families, op. cit.

[12].       Productivity Commission, op. cit., p. 45.

[13].       Budget measures: budget paper no. 2: 2015–16, op. cit., pp. 154–5.

[14].       Early Childhood Australia, op. cit.; Goodstart Early Learning, op. cit.

[15].       T Abbott and S Morrison, op. cit.

[16].       E Griffiths, E Borrello and M Clarke, ‘Budget 2015: childcare package headed for Senate stoush; more public service cuts on the way, ABC News, 11 May 2015.

[17].       P Coorey, ‘Nats seek more cash for home childcare’, The Australian Financial Review, 7 April 2015.

[18].       Budget measures: budget paper no. 2: 2015–16, op. cit., p. 154; S Morrison (Minister for Social Services), $246 million Nanny Pilot Programme to support families in work, media release, 28 April 2015.

[19].       Budget 2015–16: families package, op. cit., p. 10.

[20].       Productivity Commission, op. cit., p. 455.

[21].       Australian Government, Federal financial relations: budget paper no. 3: 2015–16, p. 32; T Abbott (Prime Minister), C Pyne (Minister for Education and Training) and S Ryan (Parliamentary Secretary to the Minister for Education), Funding certainty for preschools, media release, 3 May 2015; Australian Government, Budget 2015 overview, p. 13.

[22].       Federal financial relations: budget paper no. 3: 2015–16, op. cit., p. 32.

[23].       Federal financial relations: budget paper no. 3: 2015–16, op. cit., p. 35.


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