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Thursday, 14 November 1985
Page: 2119

Senator GRIMES (Minister for Community Services)(10.09) —I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows-

The Bill aims to achieve a fairer basis for funding child care centres.

This Government has demonstrated a major commitment to the provision of child care in Australia. Since we were elected there has been significant growth in child care services. The number of places for full day care has increased from 37,580 in June 1982 to 63,535 in June 1985-an increase of about 70 per cent. Expenditure on children's services has increased from $65 million in 1982/83 to an expected $143 million in 1985/86. This rate of growth has been much faster than in other comparable programs and far in excess of economic growth.

Notwithstanding our record of achievement, we were not satisfied with the level of community access to quality child care services. As a result, in December 1984 the Prime Minister announced this Government's commitment to the provision of a further 20,000 child care places over the next three years.

It was a good time to re-assess funding mechanisms. The Child Care Act had been operating for over 10 years. Service providers and children's services organisations had found inequities in parts of the Act, particularly in the complex formula governing operational subsidy.

There was also concern about the costs associated with maintaining child care centres. There were few, if any, incentives for service providers to keep costs down. Higher costs were subsidised by higher Government fee relief subsidies; and insufficient contribution was being made by families with higher incomes.

Equity was a major concern in two senses. Firstly the Government was concerned that, despite the large growth over the last two years the Program still only reached about 7.5% of pre-school aged children. We believed that higher recurrent costs would make it difficult to continue to expand the Program beyond the additional 20,000 places we were committed to. Secondly, we were concerned to ensure that child care centres received funding on a consistent basis. Under the current funding system this is not the case.

The Government decided to review the subsidy arrangements for full day care services. This review was announced by the Treasurer in the context of the May Economic Statement. Any review likely to come up with valuable long term administrative and policy change had to get to the roots of the problem. So the Government set a target of $30 million savings that it would like to achieve in a full year. But to be consistent with the Government's priorities these savings had to be found responsibly and within basic principles that reflected the need to maintain standards and quality of care and to maintain affordable child care particularly for low and moderate income earners. We were not prepared to surrender these fundamental principles.

A comprehensive examination of child care funding was carried out and it became clear that it was not possible to achieve savings of more than about $10 million in a full year, without breaching the principles that had been set. I make no apology for that. The Government's purpose was to ensure that its commitment to the expansion of the child care places could be achieved, reaching as many people as possible, at a responsible cost.

The changes to the subsidy arrangements provided by this Bill will ensure that the essential characteristics of quality services will be maintained and that services will be accessible to families particularly those on low incomes and with special needs.

These changes are aimed at the long term future of the Program. The Government believes they establish a sound base for the expansion of the Program in the next three years and beyond.


Before describing these changes I want to take this opportunity to review achievement under the Children's Services Program and to set the direction in which this Government will be taking the program.

When the Child Care Act was introduced there were about 50 non-profit centres in this country. Today there are in excess of 800 and about 300 of these have been approved for funding by this Government since 1983.

Under the Children's Services Program, but outside the Child Care Act, other services were funded to meet the child care needs of parents, particularly of working parents. 260 family day care schemes have been established, over 50 by this Government. Last year the Government put the funding of family day care on a firmer basis by increasing the operational subsidy by 20% and introducing an additional part time allowance of $3 a child. Expenditure on family day care has increased from $15m in 1982/83 to an expected $40m in 1985/86.

There are 432 outside school hours care services, over 160 established by this Government. The Government regards out of school hours care as essential if child care provision is to respond to the needs of working parents. Last year the Government increased funding for these services by an average of 25%.

Other services have developed under the umbrella of the Children's Services Program. These include special services to meet the needs of children who because of background, disability or where they live do not have ready access to standard child care. There are special services for Aboriginal and disabled children and children of ethnic origin and for those who live in remote and isolated areas. We are also intent on facilitating the access of Aboriginal, migrant and disabled children to centre-based care and family day care and special grants are available for this purpose.

It is essential that child care is affordable for low and moderate income earners.

The Government's commitment to making child care affordable is evidenced by the new fee relief system introduced in July 1984. This reform meant that families eligible under a national income test pay the same fees at the same income level. There are special provisions that ensure child care is affordable for families who have more than one child in care.

Under the new arrangements fee relief will be extended and simplified to ensure that child care remains affordable. This means we are targetting a larger proportion of funds to meet income related need while continuing to subsidise all families through operational assistance.

So that new services are distributed equitably and are located where they are most needed the Government last year introduced a planning model and established consultative machinery in each State.

For the first time there is a rational basis for the planning and establishment of new places. There is also for the first time a long-term commitment by the Government. We will establish 20,000 new places over the next three years. This is currently estimated to cost $107 million.

Over the last ten years a number of innovative programs developed under the Children's Services Program. The Family Support Services Scheme began in 1978 to stimulate the provision of services for families with dependent children.

The Family Support Services Scheme continues to be administered by the Office of Child Care but it is now a separate program with its own budget allocation. Another important initiative was the Youth Services Scheme, which is now part of the Supported Accommodation Assistance Program (SAAP).

The Children's Services Program therefore had a broad focus at a time when there were no other suitable auspices to advance important policy initiatives.

With the establishment of other more targetted services, it is no longer necessary for the Children's Services Program to take initiatives across such a broad range. Accordingly we have been reassessing and focussing the objectives and direction of the program.

The Children's Services Program will continue to provide funding to non-profit services that advance the developmental, social, emotional and intellectual needs of children while their parents are working, training for work or actively seeking work. The provision of an additional 16,000 full day care places gives added emphasis to this objective, as does the provision of an additional 4,500 out of school hours care places. We will also be responding to the needs of women at home and the provision of an additional 3,000 occasional care places reinforces this commitment. We will continue to ensure that all services are available to Aboriginal, disabled and migrant children and that, as appropriate, specific culturally relevant services are established for these groups.


Since coming to office we have taken significant steps towards achieving rationality and equity in the Program. The changes which are the subject of this Bill take this process further. They will mainly impact on centre based day care and will take effect from the beginning of April 1986.

Operational Subsidy

Currently operational subsidies average $30 a week and benefit all families irrespective of income. For example, families using child care centres who now pay the full price pay an average of $55 a week for full time care even though the actual cost of care is on average $85 a week.

The current system is complex and leads to inequities, including market disparities in operational subsidies between centres. Another important concern is that small reductions in the number of children can lead to a big reduction in salary subsidies.

Under the new operational subsidy arrangements set out in Clause 3 of the Bill, centres will get a subsidy of $16 a week for each approved place for children under 3 and $11 a week for each approved place for children aged 3 or more. This recognises the special needs of younger children and the higher costs of caring for them.

These subsidies will be for services that operate for at least 8 hours and up to 10 hours a day and for at least 48 weeks a year. Additional grants will be provided to centres that are approved to operate for more than 10 hours.

Current levels of operational subsidy will be reduced by about half, resulting in an average increase of $15 in a centre's full time fee to a new average of $70 a week. This does not mean that most users will pay this much more as the fee relief changes will ensure that full increases in fees will only be met by those families with higher incomes.

The subsidy will be adjusted from time to time to reflect cost of living and wage increases. They will also be paid in advance in order to alleviate cash flow problems.

Impact on Families

The impact of the changes in operational subsidy will be reduced by changes in the fee relief system. These changes, while not requiring legislation, are an integral part of the new funding package. Higher costs resulting from the overall reduction in operational subsidy will largely be offset by greater fee relief subsidies for low and moderate income earners and by moderately increased fees to be paid by high income earners. In other words the balance of the Commonwealth's overall contribution to care has been redesigned to give increasing emphasis to income related need.

Under section 12A of the Child Care Act the Commonwealth provides funds to centres so that families on low to moderate incomes pay reduced fees. These arrangements will be extended and simplified to ensure that child care remains affordable.

Under the new fee relief system:

the minimum fee will be increased by 5 cents an hour or $2 a week for full time care (40 hours a week);

families with one child in care, whose incomes mean they pay more than the minimum fee, will pay 15 cents extra in fees for each extra dollar they earn above an assessed family income of $225 a week, until they are liable to pay the full fee. Previously the 15 cents rate applied only to families with an assessed family income of less that $467 a week; above that they paid 30 cents extra for each dollar earned;

special arrangements for large families are also improved. The rate will be a uniform 20 cents for families with two or more children in care. The previous rate was 40 cents when assessed family income exceeded $467 a week;

fee relief will not be offered for that part of a centre's fee in excess of $80 a week. This measure is an incentive to contain costs as centres will have to consider the additional burden on families if they want to charge a higer fee;

additional assistance (Special Fee Relief) will continue, at the discretion of the centre, to families in exceptional circumstances.

Special transitional assistance will be available in the first year only, to ensure that no family has to pay more than $25 a week more and to encourage centres to charge no more than $85 per week.

Impact on Child Care Centres

The combination of the new operational subsidy and other changes ensures the viability of centres. They will still be expected and able to operate on break-even budgets. The measures are designed to make administration much more simple for both the management committees of centres and the Government. This will save costs and centres will have a better idea of how much subsidy they will get each year.

Impact on Women

The Government's child care policy including the proposed changes is consistent with the Government's equal opportunity and affirmative action initiatives. The continuation and improvement of the fee relief system limits workforce disincentives and the 20,000 place commitment will result in increased access to child care.

Impact on Quality

The Government remains committed to providing quality care that promotes the developmental, social, emotional and intellectual needs of the child. It is for this reason that the Government has continued to provide a substantial operational subsidy irrespective of income and to provide higher subsidy for under three year olds in recognition of their need for a higher staff-child ratio.

It is the responsibility of State governments to regulate child care and licence child care centres, and services funded by the Commonwealth have to comply with State government regulations.

However, the Government is actively committed to funding and promoting quality child care. It is important that the Government is well informed on trends in quality and that funded services have access to professional advice and assistance on matters pertaining to programming, play activities, developmental needs of children and so on. For this reason I have asked the Australian Early Childhood Association to advise me on quality issues and to strengthen and extend their current role in providing advice and assistance to funded services.

Capital, equipment and establishment grants provided under the Child Care Act will be continued and are a further indication of this Government's commitment to quality care.

Financial Impact

The measures provided in this Bill are expected to reduce the Government's subsidies to the Children's Services Program by $2.6 million in 1985-86 and $10.2 million in a full year. The additional administrative costs of implementing these measures are estimated to be $0.46 million in both 1985-86 and 1986-87.

Child Care Objectives

I have set out today, Mr President, not only to explain the purpose of this Bill, but also to provide Senators with a broader understanding of the background to the Children's Services Program and the reasons for the Government's decision to change the way in which subsidies for centres are provided.

I have touched on some of the essential characteristics of the Program to which the Government is committed. Finally, I intend to outline the objectives of the Children's Services program in order to ensure that there is knowledge and understanding of the framework in which funding decisions are made.

The Government's primary objective is to ensure that parents and children have access to quality children's services that are appropriate to their needs regardless of their income level, cultural background, disability or geographical location.

Within this broad objective the Government's priorities are towards providing non-profit services that:

promote the developmental, social, emotional and intellectual needs of children without substituting for the care they receive from their parents;

are consistent with the Government's policies of equal opportunity and affirmative action, and are predominantly directed towards meeting the needs of children of working parents or parents who are undertaking vocational training to enter the workforce;

encourage parent participation in management;

are accessible for low and moderate income earners;

focus on under school age children but also provide older children with care out of school hours and during school holidays;

support parents at home with young children;

assist those with special needs such as Aboriginal, migrant and disabled children and children in remote and isolated parts of Australia; and

are accessible to the general community,


Mr President, the measures in this Bill represent a fundamental redesign of child care funding arrangements. The new structure blends the objectives of equity, quality and affordability as well as simplifying the administration of the Program. In addition sensible cost controls are now contained in the structure. The Program is well placed to expand and respond to contemporary child care needs. I commend the Bill to the Senate.

Debate (on motion by Senator Messner) adjourned.