“How to get early childhood education right” - 2014 Economic and Social Outlook Conference

Speech
  • Assistant Minister for Education

Introduction

It’s a great pleasure to be here at the Economic and Social Outlook Conference.

This conference is – by its very nature – the perfect event at which to discuss the future of child care and early years education in Australia – both the challenges and the unique opportunities.

Child care and early years education has for many years been seen and debated as an important area of social policy.

But more and more it is correctly seen as an economic and productivity policy issue – both in terms of its impact on the workforce participation of today’s parents - and the education and skilling of tomorrow’s Australian workforce.

I’m going to spend some time discussing the growth of the child care sector in recent years.

In terms of the economic outlook, I will focus on the cost to taxpayers and the potential for increased workforce participation when we get the accessible, affordable and flexible child care system required for our contemporary economy.

I’ll finish by outlining the next steps in this policy space, including the pending PC Inquiry draft report and Review into the National Quality Framework.

The Child Care Task

The theme of this year’s conference is ‘Pathway to growth: The reform imperative’.

Child care is an essential component of broader economic discussions around national growth.

Making quality child care and early learning affordable, accessible and flexible is vital to Australia’s economic future, our productivity and the nation’s prosperity.

Between 1999 and 2011, the number of children aged birth to four years in formal care increased by 8 per cent. It is one of the fastest growing sectors in the Australian economy.

In 2012-13, almost 16,500 child care services were operating, with over 1.3 million children in attendance. There are also approximately 4,300 preschools across the country delivering early education and learning to approximately 163,000 four and five year olds in the year before formal school.

The sustained growth of the sector over the last decade reflects broader changes and the demands of a modern economy.

So we need to have a mature policy debate about child care and early learning – and like any social or economic policy debate it needs to be based on facts – on verifiable evidence.

That’s why, as one of our first priorities on coming to Government, we tasked the Productivity Commission to undertake a broad ranging inquiry into Australia’s child care sector.

The Economic cost of child care and early education, with particular emphasis on the Federal Budget.

An important facet of the debate, and a reason to get it right, is the sheer cost to the taxpayer.

Over the next four years the Government is increasing child care assistance to $28.5 billion to assist around a million families each year through the Child Care Benefit and Child Care Rebate.

This is a significant and growing investment by Australian taxpayers. And the cost of child care assistance is growing each year.

Given this rising cost – there are important economic questions to be considered in the child care policy space, such as – when and how should government intervene in the delivery of a social good or service?

Let’s not forget, the Australian Government does not generally build or operate child care centres, or set child care fees.  Even the accreditation and regulation of child care services is carried out by state and territory governments.

The primary role of the Australian Government is to provide families with financial assistance to help cover the cost of child care and to stimulate workforce participation.

We do this in two ways: through the means tested Child Care Benefit, referred to as CCB; and the non-means tested Child Care Rebate, which reimburses 50 per cent of parents out of pocket costs up to $7,500 per child, per year and is often referred to as CCR.

And while I am on the topic of CCB and CCR, it is impossible to discuss the economic and social benefits of getting child care right without making reference to the recent Federal Budget.

Whilst recognising child care assistance is an investment in the future of Australia, the Government nevertheless has a responsibility to all Australians to repair the Budget, strengthen the economy and prepare our nation to deal with long term challenges and take advantage of new opportunities.

As you are probably aware, in the 2014-15 Federal Budget we had to make some difficult – but necessary – decisions in this portfolio area, including maintaining the income thresholds for Child Care Benefit for the next three years.

It gives us no pleasure to have inherited the debt and deficit that we have from Labor.  We make no apologies – once again – for addressing the urgent need to manage the nation’s finances responsibly – and to live within our means.

That is why any Government investment, irrespective of the policy area, must be sustainable and must be targeted where the most good can be achieved. This is a simple concept – but one that is all too often forgotten.

Workplace participation and access, cost and flexibility of childcare.

As I mentioned before – child care and early years education is an important part of our economic policy because of the impact it has on the ability – of women in particular – to participate in the workforce.

To put this into context with some statistics – women comprise 45.9 per cent of all employees in Australia, of whom 53.6 per cent work full-time and 46.4 per cent work part-time.

The labour force participation rate for women is 58.4 per cent, which is lower than the 71.1 per cent for men.

Currently too many women cannot re-enter the workforce, are delayed in doing so, can only do so partially, or have to work in jobs that do not match their skills, abilities and experience.

This means that many women are unable to realise their full economic potential.

Our nation’s economic strength is substantially reduced as a result.

Modelling by the Grattan Institute suggests that, if Australian women were able to do as much paid work as women in Canada – implying an extra six per cent of women in the workforce — Australia’s GDP would be about $25 billion dollars higher.

Findings from the Australian Bureau of Statistics study, Barriers and Incentives to Labour Force Participation indicate that child care costs and access are likely to be significant incentives or disincentives for women in particular to join or increase their participation in the Labour force.

If we look at the number of people who are not in work but available for work, 797,600 (66 per cent) were women. Around 20 per cent (19.9 per cent) of this group cited ‘caring for children’ as their main reason for not looking for work or working more hours.

When you delve into this data further – and take into account those who prefer to stay home with their children – it is evident that there are more than 100,000 women in Australia who are available for work, but are limited in looking for work or extending their working hours, by the need to care for their children.

While we want to ensure that all parents have the child care they need, we cannot escape the fact that the availability of child care disproportionately impacts the workforce participation of women.

And the extent to which child care influences their participation comes down to three main issues; affordability, access and flexibility.

Affordability

Understandably, simply throwing money at child care – racking up even more debt on the nation’s credit card – does not improve its affordability.

I note that on 22 June, the National Centre for Social and Economic Modelling (NATSEM) released their Income and Wealth Report Issue 35 – Childcare and Affordability in Australia.

This report highlighted Labor’s failure to address the issue of child care during six years in government.

It states that “Government subsidies help to keep a lid on families’ out-of-pocket child care costs, but it is hard to escape the conclusion they have also helped drive up prices and the cost to government.  The higher prices go, the more financial assistance families will require and so the cycle continues”.

When you consider that child care fees skyrocketed 53 per cent under the previous government, and out of pocket costs increased by up to 40 per cent for families in Labor’s last four years of government – it is abundantly clear that the current situation is unsustainable for families and for government.  This makes it vital that we shape new policy for the next generation.

Other issues of complexity being raised with the Productivity Commission include:

  • the gains or losses from working an additional day – with quite differential impacts on families’ disposable incomes
  • middle income households feeling penalised for working long hours and
  • the reduced value of fee subsidies when children need to attend more days of child care a week.

Access

While we’ve seen strong growth in the sector over many years, supply and demand of child care places is still mismatched in many areas.

Submissions to the Productivity Commission tell us that families face challenges such as:

  • long waiting times for places and timing this with a parent’s other commitments – usually a mum - returning to or starting work
  • trying to arrange for siblings to attend the same service
  • the need to take a child care place when it’s available – which may be ahead of earning the income to pay for it – or having to keep a place that’s not needed, and
  • having to compromise on quality or convenience, simply to get a place.

Flexibility

Flexibility in child care presents similar barriers for many families.

Often, where parents have access to child care, the conditions under which it’s provided are simply not flexible enough to accommodate work or other family commitments.

Specific issues raised through the Productivity Review include:

  • the need for parents to ‘tag team’ to cover other commitments
  • the money wasted by having to take the same days each week, even though the parents’ needs may change
  • the need to pay for a full day when only part of the day is required, and
  • difficulties in coordinating the hours of child care and early learning, with other kids who may be in preschool or school.

So what is next?

Before the last election I made it clear that we had heard the voices of Australian families struggling with the child care challenge, struggling to balance work life and home life.

As part of our response to those issues we committed to establishing a Productivity Commission inquiry into the child care sector.

We need to move beyond short-term solutions that only add to the overall cost of child care and undertake a deliberative policy process to establish an effective plan for implementation.

If we don’t, we will never move out of the realms of grand theory to good practice.

So far, the Productivity Commission has received over 460 formal submissions, which combined with the online comments, means that nearly 1200 individuals and organisations have engaged with the Inquiry.

This is amazing engagement by the sector and the community at large and emphasises the importance of getting child care and early learning policy levers right.

It should also encourage debate around what is an important social and economic policy issue that supports children's development and facilitates parents' employment.

This work is critical to informing the Government’s decisions about the future of child care in Australia – as I mentioned before – it is critical to us as a nation having a mature policy discussion about how to place child care and early learning on a pathway to a sustainable future.

The draft report is due to be released for public comment later this month.

I’m aware of fevered speculation about the findings of the Productivity Commission and like everyone else, I am very keen to see how the Commission thinks we can improve the current system. What works – what does not?

For example, I don’t think anyone would disagree that the current system of assistance is complex for parents, complex for services to administer and complex for government to oversight.  I’m sure that everyone in the sector would welcome a simpler system.

But the issue is getting the design of any new policy right.

It must support parents in their choices around work and family.

It must ensure quality of care and early learning for the next and subsequent generations of Australians.

It must facilitate greater workforce participation.

It must be economically sustainable.

We need to listen to Australian families and employers and draw on our collective understanding of social and economic policy, on labour market analysis, on academic research to think the big policy picture.

Current measures

As we lay down the path to a sustainable sector, we have also been fixing up urgent issues along the way.

Let’s take the 2012 child care regulatory framework – the National Quality Framework – or NQF – as an example.

The NQF has brought significant positive changes to the sector; however, I remain concerned about its implementation.

Along with my Ministerial colleagues I support the NQF and its policy goal of higher quality child care and early learning and national consistency.

However an independent report found that around 80 per cent of providers find the reporting and administrative requirements to be burdensome. We need to make sure that the NQF requirements do not result in red tape that gets in the way of a better education for kids.

For example, the practical reality of this policy was the creation of a requirement to hold a supervisor certificate – which meant a child care service had to apply for a certificate for each and every person who would be in charge of the service at any time.  This created a huge regulatory burden on services and educators and an administrative backlog for regulators.  The regulator’s May 2014 report found that for 14,358 child care services in Australia, there were 78,649 supervisor certificates – each one costing the service $30.

While I’m happy to report that this issue is one States and Territory Ministers have moved to fix just last month, it remains a clear illustration why the translation from the theoretical to the practical is so important and how poor implementation can detract from the policy goal.

Red tape also has an impact on the pockets of parents.

A report by the Australian Children’s Education and Care Quality Authority (ACECQA) found the ongoing cost of administering the NQF for a long day care service can be as high as $140,000 per year.

These increased costs are passed onto families and can have a major impact on parental decisions about whether they can afford to go back to work.

And only this week, I met with representatives of a large not-for-profit child care service provider who expressed concern that while they have the resources to manage the administrative burden of the NQF, small, family run services with around 25 places are struggling to cope.  In fact, in some cases where these services are at risk of closing because they are simply no longer profitable, the not-for-profit provider is stepping in to take over services that run at a loss, just to ensure that services remain available for the local community.

This is a really important point, because I don’t want a quality framework that - despite its best intentions - forces small child care centres out of business leaving communities without services, or tells families how their children should be cared for.  I don’t want a regulatory environment where we end up with a ‘one-size-fits-all’ approach to child care.  That would leave no opportunity for parental choice.  I want a system that helps the small centre thrive in its own way, just as the corporates can.  Yet an onerous level of regulation dissuades smaller providers who do not have the infrastructure or personnel numbers to implement it.

Again, I want a system where the ‘theory’ of quality is achievable and realistic. 

That’s why I’m continuing to work with my state and territory ministerial colleagues to reduce red tape whilst maintaining quality of care.  And I’m pleased that there’s been agreement on a number of improvements to date, including addressing the supervisor certificate issue.

The review of the NQF, currently underway, will expand on these initial steps. In particular the Review is examining what has been achieved under the NQF and where there is scope for improvement.  It needs to ask whether the ideals of quality embedded in the NQF are achievable.

While we are taking the time necessary to properly review key policy areas and design policy that will serve families for decades to come, I also want to highlight a number of the measures we’ve announced since coming to government, including:

  • a $200 million professional development programme – the largest ever investment in the upskilling of long day care staff, with a particular focus on areas of need including early childhood teachers and educators in regional and remote areas.
  • I’m very proud to inform you that this government is reinstating $12.6 million of funding cuts made by Labor to Occasional Child Care – a service of great importance to families needing care at short notice, particularly those in rural and regional area impacted by seasonal work.


Conclusion

As I said at the outset – this Government sees child care and early childhood education as a critically important area of social and economic policy.

I know the current system is causing many concerns for families, small business operators and employers.

We have a rare window available to drive successful and lasting change for the sector.

We will do this through major initiatives such as the Productivity Commission Inquiry, the review of the National Quality Framework and other reviews underway, as well as ongoing consultation with the sector.

Our clear task is to get the framework and settings for early childhood education and care right, and I look forward to the child care sector contributing even more to workplace participation and productivity in the future.

For more information

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