Simon Birmingham: Good afternoon, and thank you for coming along today. The Government has, consistent with our commitments, introduced to the Parliament today the Jobs for Families child care reforms. These are important reforms to our child care arrangements, and because they will enable is us to implement a new system of child care that is simpler and fairer for Australian families.
Around 1.2 million Australian families access child care on a regular basis, and we're aiming to make it simpler for them by ensuring that for those families, the multitude of payments that currently exist – more than three different payment structures and types – are rolled into essentially one new, simple, child care subsidy. We want to make it fairer for people to make sure that the more you work, the greater your entitlement to government-subsidised child care. The less you earn, the greater the rate of subsidy you will receive. It's an incredibly fair proposition. Work more, you get more hours of child care; earn less, you get greater support in dollar terms for that child care.
Ultimately, we believe it will deliver better outcomes, lift workforce participation, help encourage more people into the work force, help encourage greater volunteering, help encourage people to study, get greater results from the $40 billion that the Government expects to invest in child care over the next few years, more than $3.2 billion of additional expenditure.
Our number one focus is overwhelmingly on families and children – supporting families and parents in their working ambitions, supporting children accessing child care to have support for the early learning opportunities it provides. There's an incredibly strong safety net built into our child care reforms. First and foremost, every single Australian child in their pre-school year is entitled through our universal access arrangements to at least 15 hours of dedicated pre-school each year, regardless of family circumstance. On top of that, low-income families will receive 12 hours of support through the child care subsidy system to access early learning centres and child care facilities if those families are earning less than $65,000 per annum. On top of that, we have clear safety nets in place to support children at risk in vulnerable circumstances, and to provide critical additional assistance to help grandparents who are the primary carers of their grandchildren.
Importantly though, by applying an activity test, by making sure the child care arrangements are structured in a way that rewards people for greater work, we are able to make sure that those families working the hardest receive the greatest benefit. So families in 2017, when this reform is implemented, who are earning between $65,000 and $170,000 will on average be around $30 a week better off – some $1500 per annum in terms of their child care bills. That's a big step forward for those working families, and a recognition that they are the ones who are in a position where they deserve that level of government support.
Historically, government child care arrangements have been quite inflationary in their nature. What we're trying to do with this reform is to stop that huge rate of growth in the cost of child care that we've seen in recent years. So by setting an efficient capped price at which the government subsidy will be paid, we hope to be in a position where the child care sector responds to that because there will be parental pressure to operate below that capped price. It's a generous cap; it's a cap which well and truly reflects the overwhelming majority of providers at present in terms of what they charge, but we believe it will work in a manner to help keep a lid on price growth.
So overall, we think this is a simpler, fairer, and more affordable child care arrangement. But of course, like any major reform involving significant additional spending, and some $3.2 billion in this case, it must be paid for. Ms Macklin, the Shadow Families spokesperson, has acknowledged that you have to somehow pay for a reform of this type. That's why it should be looked at as an integrated package with the reforms to Family Tax Benefit that my friend Christian Porter here, the Minister for Social Services, is equally advancing, because together we have to represent and put forward a package that is paid for by the taxpayer and does not undermine the budget bottom line.
And so this should be considered as an integrated reform, and I draw to your attention the couple of cameos that are provided in the information that we've released which demonstrate, for families who are engaged in the work force, who have young children and a need to access child care, they are demonstrably better off not just in terms of their child care bills but in terms of their overall financial circumstance as a result of the integrated package of reforms we've presented.
Christian Porter: Simon, thanks and well done. Obviously, as Simon's noted, my side of this ledger is to find appropriate and reasonable savings to pay for the $3.2 billion worth of reforms. Look, all I wanted to put to you today, because we have been through this before, is that in two areas there's been a slight modification, essentially because the Education Minister has been able to deliver the child care reforms in a slightly abridged funding envelope. We've had the opportunity to be a little bit more generous in terms of the way in which we find the savings into the Family Tax Benefits.
So the legislation that was introduced this morning excludes that which Labor agreed to, which was the $525 million worth of savings for FDBB families, couple families whose youngest child turns 13. That is now in of course a separate piece of legislation that's passed through the Senate. So what went to the Parliament this morning was everything but that, which has been agreed to, but also with two slight modifications, which was to exclude from any changes grandparent carers and single parents over the age of 60. The combined effect of those two groups being excluded is around $74 million worth of lost savings, but as I say, we've been able to accommodate that because the overall child care package is able to be delivered in a slightly more efficient way than we at first considered.
Simon Birmingham: Thanks, Christian. Questions?
Question: On the- just back on the child care issue Senator. What thinking was there in terms of the people earning over 340,000, they will still get 20 per cent minimum child care subsidy. Why didn’t you, given that you’re introducing means testing, why didn’t you just scrap a subsidy for people who were earning so much money altogether rather than keeping a subsidy effectively for some millionaires?
Simon Birmingham: Thanks Andrew. There’s been a very very steady, and thorough, and consultative process of developing these reforms. And of course the greatest analysis into Australia's child care and early learning system undertaken in recent years occurred via the Productivity Commission inquiry into child care and early learning. And that inquiry recommended that there should be a floor in relation to child care subsidy that applied to all family circumstances to make sure that there was an appropriate incentive for workforce participation. You have to remember that when you are talking about family income levels it's not necessarily the family income level that matters most to a workforce participation decision in relation to child care; it's the secondary income earner that is often the decision point. And so by putting a floor in relation to the child care subsidy, there is always still an incentive there and some assistance there to help the secondary income earner step in.
But of course we have changed it to more closely reflect that Productivity Commission recommendation than what was proposed at the Budget. At the Budget, the floor that was proposed was a 50 per cent subsidy for all families earning above about $170,000. We've now extended the tapering process out to keep families at 50 per cent up to $250,000. It will then taper down to 20 per cent, as you acknowledged in your question, at about $320,000 dollars, and sit at that 20 per cent subsidy thereafter. So that more closely reflects the Productivity Commission. It reflects the feedback that we've received since the Budget that it was too generous.at that those high incomes, and of course it brings the child care reforms in at a lower price than had originally been forecast, enabling some of the savings measures Christian talked about to be put aside.
Question: Labor highlights NATSEM modelling that suggests about one quarter of families would be worse off under the new system. I guess that's positive, it suggests three quarters won't be in a way. But what does your modelling suggest about the number of families who will be worse off under the new system compared to the current?
Simon Birmingham: Well, Tim, we are committing to a child care reform here that's spending $3.2 billion extra over the next few years. It's a reform that is ensuring the rate of subsidy for average earning families, earning between some $65,000 and $170,000 goes up, and that those families will on average be $30 a week better off when they go to pay their child care bills. So the vast majority of Australians will benefit under these reforms. But perhaps most importantly is that the only way, aside from those high-income earners, that people might in any way be disadvantaged is if they fail to meet the activity test that is being applied. And the activity test is an incredibly light-touch activity test. It requires only a few hours of work per week to be able to access that first instalment of child care services. It exempts everybody under $65,000 for the first 12 hours of their child care services. The activity test includes studying and volunteering as well as working.
So there's no reason as to why any family need necessarily be worse off in those lower-income categories if they are willing to volunteer, to study, to look for work or ultimately to secure work. So I really do reject this proposition from the Labor Party that there's some huge cohort who are worse off. That's just not true. The vast majority are much better off and indeed the incentive is there and the opportunity is there for families to ensure that they need not be any worse off aside from those at the high-income end who are having their subsidies reduced.
Question: But isn't the point also that you want people to be worse off to the extent that it encourages people to go back to work? Like isn't that the reality?
Simon Birmingham: Well, Sam, we want indeed the encouragement to be there to volunteer, to study, to look for work and to work. And that is absolutely why the model has been developed in the way it has, with the activity test that's there - but also, to reward people who are working more and therefore who rely on child care more with more hours of subsidy for their child care. It's the core part of the fairness proposition. The more you work, the more hours you get; the less you earn, the greater the subsidy you get.
Question: In terms of the incentive, though, isn't there a fairly strong risk that the value of the additional money will be eroded over time because it's linked to inflation, it's not indexed for the cost increases of child care. In the past, if your child care costs went up, you would get more back from the rebate, you might hit the cap faster. But what's built into the system to make sure that the extra money you're putting in isn't just gobbled up?
Simon Birmingham: The hourly cap that we're setting, which I spoke about before, is a very fair cap for child care providers. It ensures the vast majority of child care providers' current fees come in at or under that hourly cap that will kick in in 2017 under the proposals. But we are applying it to try to stop the huge rate of growth we've seen in cost in child care in recent years. And by setting a benchmark for the change in that hourly cap in the future, that tries to keep a limit on it by ensuring that child care providers feel an obligation to keep their fees at a minimum and that families do have an incentive to shop around and put the pressure to keep prices down, rather than have the circumstance where unlimited increases are somehow accepted because the taxpayer subsidy simply ratchets up with them.
Question: Mr Porter, what's the shortfall in your savings task so far?
Christian Porter: The shortfall between?
Question: What the other savings that you need.
Christian Porter: Well, the savings here are sufficient to pay for child care if they are all passed and leave a little bit over to assist with budget repair. So the original package of savings was $4.8 billion. Labor have agreed to $525 million and we have effectively reversed with respect to grandparent carers and single parents over 60 about $74 million on top of that. So effectively the bill that went before the House this morning represents about $4.2 billion worth of savings which as you will note is sufficient to pay for the child care reforms and make a modest contribution towards budget repair.
Question: So what will you do if the child care package passes Parliament but you still have the cuts to supplements still stalling?
Christian Porter: Well, we've been very clear from the outset the child care package absolutely has to be paid for. They are twins. So the parliamentary passage is a question of parliamentary passage, but whether or not we're actually able to engage in the child care reform on the ground means that we have to pass the FTB savings.
Question: So what will you do, will you renegotiate with the crossbench and try to get some leeway on it?
Christian Porter: In my discussions with the crossbench there's a great attraction to the child care reforms. They are seen as excellent reforms. Obviously there are difficulties in garnering savings, but the point has been made quite clearly that these are the savings that pay for the reforms. Those discussions will be ongoing, we'll do whatever we can in those discussions to convince the crossbench but they've been convivial and productive so far. They're not all complete. But we're just working on it.
Question: But the legislation is contingent on the passing of the savings because you can't do that legislatively, can you?
Christian Porter: That's a link that we are making as a matter of policy.
Question: In practice you can't put it in place, can you, unless you...
Christian Porter: Well they're two separate pieces of legislation.
Question: [Indistinct] if that’s alright, Mr Birmingham. You've agreed to an amendment from Glenn Lazarus on that legislation for the aviation industry. Doesn't that open the bill to being, you accepting amendments from all other kinds of groups for it? Why have you done that for him?
Simon Birmingham: Glenn's amendment is not specific to the aviation industry. That's just an example that he gave in his speech introducing that amendment. Glenn's amendment deals with the fact that our changes that we're applying as a government will cap the rate of loans that providers can offer in 2016 at 2015 levels. So that a provider who's been operating this year going into next year will not be able to offer VET FEE-HELP loans in excess what have they offered this year into next year.
Glenn's proposal is to say well what about if there is an area, an occupation, a skill, a qualification of national interest, of national importance that is part of a licensed profession, where the provider has capped out in terms of their loan volume and in capping out on their loan volume, they're then now turning away students from undertaking that course, which is of national importance and which is required for a licensed occupation. We've said through Glenn's amendment that we will consider those on a case-by-case basis. So the Secretary of the Department of Education, assuming this legislation now goes back through the House of Reps successfully, will be empowered on a case-by-case basis to consider whether there's cause for some very discrete, finite exemption to that cap in terms of the total loan volume.
Question: Just on NAPLAN, Indigenous students are well behind their non-Indigenous classmates. Should schools in the Northern Territory be better resourced to deal with language barriers?
Simon Birmingham: Schools in the Northern Territory are better resourced through the times of needs-based funding formulas that we already apply as a government which provide very significant loadings on the base of SES background, on the base of Indigenous background, on the basis of disability, and other loading factors. So there's a significant extra funding that goes in. NAPLAN showed some improvement in Indigenous results, so that modest improvement is good news, but there's a long, long way to go and especially a long way to go to bridge the gap between Indigenous students and the rest of Australia, and I hope and trust that the extra support we are providing as a government, as well as our focus on school attendance and as well as our focus on trialling direct instruction in schools, can actually help to bridge that gap further, faster and more effectively.
Question: We also talked about some Islamic schools that you thought you would look at their funding. How's that going in terms of analysing whether they should still be getting taxpayer funding?
Simon Birmingham: The department served notices on those schools a couple of weeks ago, I think it was now. They're still within the time frame in which they're able to respond to that notice.