Speech by The Hon Scott Morrison MP

Address to Early Childhood Australia Forum


Thank you for bringing the leaders of the sector here together this morning because this is a very important period we are currently engaged in as we move towards finalising some very important changes to the way in which the government seeks to support early childhood learning and child care right across the country.

With the Productivity Commission’s report now on the table for some time and the processes of that report being engaged in now over an even longer period of time, a fairly extensive consultation period has greatly assisted both the government and I hope the sector as well and importantly families right across the country to have a better appreciation of the myriad issues that are out there that we are seeking to contend with. Everyone in this room me included, is an advocate for children. We want to see the best for them, their families and want to ensure the support we give to the early childhood learning and child care sector is able to play the best possible role in that process and where we have our intervention that it is the best possible intervention that we can have. The recommendations of the Commission do suggest fairly significant change and not inexpensive change I should stress. Even on the Productivity Commission’s recommendations we are talking of a budget and forward estimates investment of over $1 billion – more than what is actually said in the Productivity Commission report but our own analysis of that demonstrates that. That is also before you address the issue of universal access which you all know as well is over $400 million a year. So there are big ticket items for the taxpayer when it comes to engaging these issues even at the modest level suggested by the Productivity Commission report. I think we always have to be very mindful of the taxpayer when it comes to looking at the changes we are making and importantly how we pay for those changes. The Government wants to invest more in this area and we want to respect the taxpayer in the way that we do that.

In recent weeks we have been undertaking some targeted consultations on more specific proposals and I want to thank everyone in the room for your engagement with that and the very discreet way that that has been conducted. It is very hopeful for the government to be able to have those sorts of consultations in advance rather than having to do it afterwards. I think it helps the sector as well. I think the way in which this has been done has been very, very helpful. So I want to thank Early Childhood Australia in particularly but also the many other bodies represented here for the way they have engaged with the government. That may not mean we land in exactly the same place on every single issue but the consultative process should be able to demonstrate that there has been a genuine preparedness to try and get a good understanding about where stakeholders are coming from.

As the Minister for Social Services my primary stakeholder is Australian families and their kids. That is my interest here. That is the group I am representing and the taxpayer themselves. I am not the Minister for early childhood education development or industry development. I am not looking at these as transfer payments or income support payments or anything of that nature. What I am seeking to do here and the government is seeking to do is to support Australian families with the decisions they are having to make about how they balance their own economic circumstances and the choices they have to make with the care needs for their children. We will soon be releasing this package. Last weekend we actually announced the first part of that package when we announced our position on the issue of immunisation. I made the point while much of the coverage focused on how it applied to the existing child care benefit arrangements I made the point that this will also apply to any and all new arrangements that are put in place as part of the new families package as it applies to this sector.

We want to ensure that Australian families have access to quality child care. I thank Ros for your acknowledgement of the government’s position on that. This has been an important change. It was different a generation ago where I think the choice for families to put children in care was a harder one because there were the issues surrounding how their children would develop in those centres and environments. The professionalism and standard today makes that choice a very different one for families. I think that is to the credit of the sector first and foremost and to the extent that regulation and other government initiatives have reinforced that, fine. I don’t think any of us think the framework is perfect or something that would endure for all time in its current form. I am disappointed that in some states the level of accreditation is lagging significantly behind, particularly in South Australia. With the Federal Government under the previous administration having put the quality framework in place, which I acknowledge, it is now very much up to the states. They regulate it, they monitor it, they implement it and they manage the quality of those regulations and the compliance and administrative burden of those regulations on the sector and for families. So the baton has very much been passed to the states and territories to continue to oversee and drive that quality process – obviously within the national consistency of a federated approach – but I think we need to acknowledge the states and territories really do have the lion’s share of responsibility now the quality framework having been put in place, to make it a success and to respond to the sector and to families and the cost pressures that are there to make sure that the things that are introduced are done so in a way that can be sustainable over time. We will have more changes coming in July and it would not be surprising if not all of those things work out exactly in the way the architects of the quality framework intended. The sector together with state and territories and the Commonwealth need to maintain a positive yet flexible approach to ensuring that we don’t undermine the quality standards, because that is important, but they have to be implementable, they have to be practical. They can’t just look good on paper. They have to be present in the centres and the centres have to be in a position where they are able to deliver on them and the government, because we pay for two thirds of the child care bill in this country, and parents have to be able to afford it. So the quality system is important and has been one of the key reasons why families have been able to exercise that choice from a personal point of view, a family point of view, to have confidence in the care that their children are receiving.

The fee assistance that is provided currently we, in this room, know is substantial. We know it is $7 billion in child care fee assistance every year. In this room we know that two-thirds of the fees paid in this sector are paid for by the taxpayer. But I am not sure if that is as well known outside this room. The process of the Productivity Commission report and the discussion and conversation we are having now as we move towards changes I think has brought that factor to light in the broader community. That does shine a light on how well we do this and what the objectives are in investing this $7 billion a year that the taxpayer puts into the sector and the purposes we are hoping to achieve. If I am critical of one area of the way things have been done over various administrations, this is not a partisan comment, is that it has been quite piecemeal. It has been quite ‘chop and change’. The objectives of various investments have been unclear. The Productivity Commission has borne a lot of that analysis out. So in coming to these changes I have been very keen to be clear on – why are we spending this money and where are we spending it and for what purpose? What are we hoping to achieve here? Now obviously the issue about maintaining quality is understood. That is a starting point, not a debating point and is acknowledged. So where to from there? That is where we are getting to now but we must take the Australian community with us on this journey so they understand the purposes.

One hundred and sixty five thousand Australian parents with children under 13, the Commission found, wanted to work more or simply wanted to work. It is a good thing that they want to work. It is a very frustrating thing that they are finding that process difficult. One of the key reasons for that is the way that the government engages in providing assistance for child care and early learning in this country. So it is important that our measures now, having addressed quality substantively, go to this issue of affordability. We want affordable, quality child care. That is what delivers the access. There are around 1.5 million Australian two-parent families in which both parents work. It is about two-thirds of all two-parent families in this country. There are some 480,000 single parent families, more than half of all single parent families where the sole parent works. I think that is fantastic. It wasn’t the case ten years ago. The fact that single parents now are particularly able to work because of the support and the quality of child care that exists but also the support that is there to help them make that decision, I think is a good thing. It underscores why this is a valuable investment for the taxpayer. This is changing people’s lives in that they can make a decision to work and retain choices for themselves and their own families rather than becoming a prisoner of the welfare system and being reliant on benefits for their lifetime. But more importantly than that, 12% of children today are growing up in families where no one works. We know that around 40% of those children by the time they are turning 22 will be dependent on welfare. So the more parents we can encourage to be jobbed parents, parents in work, the better the opportunities will be for their children. As much it is true that getting children into early childhood learning is an enormous benefit to them and we have seen the results of that in the most disadvantaged communities in the country, particularly in Indigenous communities and how that affects the ability for them to break a cycle whether it is poverty or intergenerational welfare dependence and all these sorts of things – equally getting their parents into work breaks that cycle as well. These are the two dual goals that we have in terms of how we put these new arrangements in place. So we have single parent families in work, we have two parent families both in work. In fact only one in five two parent families today are actually single income families today. Less than one in five. That is a big change from my parents’ generation and I suspect that trend will continue into the future, not necessarily as a result of choice by the way, but as a result of necessity because we know that in today’s modern economy it is a necessity for both parents to be in work. As I said before, the fact that they can have some confidence about how their children are being cared for today makes that decision easier. We now need to make it more affordable to enable them to do that because like a single parent family, where two parents are able to support their own families through work then they have more choices. This is all about giving families more choices to ensure they have the opportunity of work themselves which frees them from the restrictions that are inherent in being welfare dependent. Six hundred and fourteen families therefore are those where no parent works and some 400,000 of those are single parent families. So there is much work still to be done in this area.

Now today I thought I could outline where we are up to on a number of these initiatives. Many of you will be quite familiar with some of these things through the consultation process and much more aware of the back story to what I am about to share with you. What I want to start by saying is we are deliberately seeking to demarcate the way assistance is being delivered in the sector. There are two areas of objective: one area which is quite clear from what I have already said, is the participation goal of making the equation, particularly for middle to lower income families, more attractive to enable them to take the decision to work and be in work and have their children in early childhood learning and child care. The other objective is the social policy objective. That is to ensure that children who are disadvantaged, families that are disadvantaged and genuinely disadvantaged, are able to access early childhood learning. One of my criticisms of the current system is we have endeavoured to address both of those goals through the one subsidy system, through a general subsidy system. I don’t think it works. I think what we need in the area of disadvantage is a face more tailored approach. One of the reasons for that is frankly the integrity. When you have a broad-based measure to address disadvantage is wide open for abuse. Now in two portfolios I’ve had the misfortune of understanding that a part of the community thinks that any government benefit or a visa, whether it be a visa or a form of welfare assistance is a target for people to go and rort the taxpayer or the government system. Now this is a minority of our community, but it exists and whatever system you put in place, it is often the target and victim of those who would seek to abuse it for their own merits and I can think of nothing more appalling than seeking to abuse a system that’s designed to help disadvantaged children and families than the rorts that take place in that sector. We’ve been able to shut down some $70-$90 million worth of rorts in that area and we appreciate the cooperation we get from the sector in trying to do that and that’s an ongoing challenge.

I’m labouring this point this morning because it would be a mistake to simply look at the ultimate subsidy model that we bring down and think that is the be all and end all of the package; it’s not. There is a broad subsidy based system we’re looking to introduce which will be overlaid by a safety net package. A safety net package which will ensure that the gaps that exist in areas of disadvantage from a social policy point of view can be addressed but in a very targeted and in a very accountable way. So these two things work together but I’m going to ensure that the disadvantage package can have focus and can deliver to the people who most need it, just like in our welfare system, not on the basis of entitlement, but on the basis of need, and on the other side of things, the economic policy objective of participation will be addressed by the broader based subsidy measure.

Now I’ve already said that I would like to see a single payment rolling the child care benefits for low and middle income earners, and the non means tested rebate into one payment. That’s a clear recommendation of the Productivity Commission and I think it makes an enormous amount of sense. We all know the present system is far too complex and bound up in a lot of red tape both for families as well as for providers and it is very difficult often for parents to navigate let alone engage in the first place. This leads to myths and misunderstanding, for example many parents think they’re not even eligible for some of the benefits that exist and that has come out in all of our consultations with families and a single payment will be simpler both for families and service providers and both providers and parents have indicated a very strong support for a simplified system.

Now the Commission also recommends a maximum hourly subsidy rate, a maximum number of hours per week and removing an annual cap for fee assistance. Now there’s been a lot of discussion about this and we obviously continue to examine the various models that are available to us but I’ve indicated, and I’m happy to do so again today, that I prefer an alternative to the benchmark pricing method recommended by the Commission, i.e. the median approach. By definition, 50% of families are paying more than that around the country and we have I think a much better way of achieving a benchmark price, one that I think is more reflective of the array of prices and charges that are out there and is more reflective of the diversity of those things but we also need to ensure that the model provides downward pressure on prices. One of the great sins of the current system and in particular the 30-50% increase in the rebate, was to act if you like as an inflation, it had an inflationary effect on prices in the sector a bit like a first home owners grant which was criticised for doing it in the housing sector. I think that was a poor design feature in the system and can be addressed by going down the path that we intend to.

It is important to keep the downward pressure on prices in this sector and the best way to do that is ensure that we lessen the softening that exists in the market pressures that exist. What I mean by that is there does need to have to be a direct commercial exchange between users of the system and the providers of the system. The price signals that exist there need to be real and if service providers want to put their fees up, well they not only have to talk to the government about that because we pay for two thirds of the bill but we need to talk to parents as well and families and the market needs to operate in that environment and that is, in our view, the best way to ensure that we keep downward pressure on the prices both for families and for the taxpayer.

I’ve also said that I think it’s very important to have the weighting of increased investment in the sector directed to low and middle income families. I think that is a clear point of consensus and one the government also believes in. I know there are suggestions and the Productivity Commission dismissed this proposal regarding tax deductibility. We all know that tax deductibility will deliver big subsidies to people on high incomes and that is not the economic way to address the problem of getting middle to lower income families to work.

So by having a clear benchmark of what we’re trying to achieve, and that is to get families into work, particularly families that are more likely to be at risk of becoming welfare dependent, then the notion of tax deductibility simply doesn’t meet that mark. It just doesn’t meet it. It’s a very expensive way of not achieving your outcome and while I have no in-principle issue with discussions about legitimate income earning expenditure of taxpayers, I think in this case, the goal is what gets people in work and tax deductibility in this area will not get people in to work, it will just deliver a massive tax subsidy to people who are on higher incomes and won’t meet our objective.

So getting the focus on middle to low income earners is very important and that’s what you can expect to see while maintaining some consistency and continuity and the support that is delivered more broadly across the scheme. I can say that particularly we’ve been mindful of the issues that are being raised in relation to the cap, the financial cap on this issue. It is important that when people want to work more that they’re not sitting there with their calculator every day trying to work out whether they can work an extra hour or an extra day. The whole point of this system is that it enables someone to go: yes, I’ll take that extra day, I’ll take that extra two days; we don’t want to have a system that constrains that but obviously that has to be done in a measured way to ensure that it is affordable. We need to make sure that we’re helping people be in work and stay in work and that includes people looking for work and studying. I don’t want to discount that element of it as well. In a lot of our consultations a lot of families have said, particularly women have said, we’re taking this time, and when there’s the opportunity for open learning and things like this as well, the opportunity to keep skills alive and develop new skills while children are young, that is a good opportunity and obviously the provision and support for people who engage early childhood learning services will assist them in that task. Their kids learn while they learn and I think that’s a good outcome for them, for their families and for the economy largely as well.

At the end of the day we’re going to have to pay for all these things and the Prime Minister as you heard yesterday, said very clearly that we won’t be putting a levy on business. We don’t think that effectively a gun should be put to the head of taxpayers in order to provide additional support and necessary support in the sector. We do believe there is a need for more investment in the sector and we do believe that that means that the budget has to work harder to ensure that can be done by reapportioning the way we spend money. The government has quite a number of savings measures that are in the present budget and these are things that are available, when passed, to ensure that we can deliver on the investment that is necessary in this sector. That doesn’t say that anything that is in this proposal is any less worthy than any other area but it does say that taxpayers cannot continually be on the hook for more and more taxes to pay for these increased investments. Government has to live within its means and the government will look to live within its means in delivering this package and that will mean pressing ahead with important savings in my portfolio to ensure that we can accommodate the increased investment remembering $7 billion already, $7 billion already and we’re looking to invest more. So that’s our commitment but to achieve that we’re going to need some very practical assistance through the Parliament to ensure that we can deliver on the measures which we all agree, I would hope, would be important to put in place.

Now on flexibility, we created flexibility in the system, there has been much talk about the issue of nannies and we’re taking a very incremental and modest approach to this the details of which will be released at a later time but the whole point I think here is not that nannies become an alternative to mainstream care and support, it is there for those who can’t currently access the mainstream services for whatever reason. So we don’t see this as a mainstream alternative but we do see it as an area that can provide flexibility for families that can’t access those mainstream services for any number of reasons. It could be because of their remote location, it could be because the children have particular special needs, it could be because they work shift work or things of that nature and it is important though that we get the registration issues right and the qualification issues in place. If we are going to move in providing support in these areas then there is a litany of fish hooks in this and we need to get that right and we won’t be rushing it, we’ll be taking our time with it and that is through the normal pilot process that you’ve seen adopted in other areas. We’re also very mindful in this area of the workforce issue for the sector. We do not want to see a wide scale shift of people working in the formal childcare sector today move over into this sector. That will only force up prices for centres today if they lose their workers off to be nannies and things of that nature and so we’re going to take a very incremental and measured approach to this. We acknowledge the need for it but we are of the strong view that if you move too quickly on this you are very prone to a whole range of unintended consequences and so we will be looking to work very closely with the sector to ensure that those sorts of outcomes are avoided.

We’re also looking at delivering more targeted assistance to genuinely disadvantaged families and children. I want to put more support into this area, not less. More support, not less. That of course is contingent on the way that we can move matters through the Parliament but that is the outcome I am seeking. Support provided by mainstream fee assistance will not address all the issues as I’ve said before, for all of these groups in particular. These include families with special needs, in extreme poverty or remoteness or where the commercial costs of providing childcare in certain locations is prohibitive and it’s important that we have a system that overlays the general subsidy system that can meet these needs and fill these gaps. We’ll be proposing a separate programme for disadvantaged and vulnerable children and families and this is about making sure that they can access early childhood learning, that’s the point. We know the benefits of it and we want to make sure that those families who are unable through whatever other means, to activate under the activity test will ensure that they will have continued support in this important area. The current broad-brush approach in addressing disadvantage, as I mentioned earlier, I don’t think has been effective and has been open to quite significant abuse and there are issues that go to disadvantage of a community and children who may need to be supported into care for reasons other than economic participation. So I want to assure you that is something the government understands, we know it needs to be addressed and we want to do it in a very bespoke and targeted way and overlay the general system that is there. But I want to stress this, and this is where the sector I think can be a great partner of government, I said before that we understand the importance of children, particularly from disadvantaged families, being in early childhood learning, but I want to appeal to the sector to help us work to not only help their children but to help their parents as well. There are parents who currently have access to early childhood learning who could be activated and are not and we need your help to get them activated. It’s great to help their kids; it’s also good to help their parents. There are those who won’t be able to be activated. The government understands that. And by activated I mean through the various employment programmes that exist that are out there and to get people into learning or seeking work or developing soft skills that will help them re-enter the workforce and things of that nature. A something for nothing model can’t apply here. Where there is genuine disadvantage, sure, we need to help those families, but where there are families that can be activated and should be activated into work, then they should be and we need your help to do that because you’re dealing with those parents every day just like we are seeking to do as well and we are not doing those families any favours by allowing parents who could be getting themselves back into the workforce and giving them a leave pass and saying they don’t have to. It’s important that we help them make that decision and give them the opportunity to be in work and have the choices for their families that they don’t currently have and settling for a life of welfare dependency.

Finally on compliance, I’ve made some comments about the work that is being done. There’s some $70-$90 million in childcare system rorts have been thwarted so far in the first 12 months of this government and some 60 operators. We need your continued support to ensure we crack down on the dodgy operators. They are a minority in this sector as you all know, particularly in the Family Day Care area. You’ll be aware of some regulatory changes that were mooted earlier in the year and I put a stop to that because I thought there were some unintended consequences of how that would roll out that came up through the consultations we were having. We’re getting very close to now being able to put a revised regulation back in place which will have appropriate exemptions to ensure that those unintended consequences are no longer a reality and we again need to work closely with the sector because the integrity of the sector is so important. When a sector is receiving the level of taxpayer support that this sector is, then to maintain public confidence in that support, they need to be confident the sector doesn’t have serious integrity issues. Now I don’t believe the sector has widespread integrity issues and I’m sure you’d agree, but the public has, rightly, a very low tolerance for rorting of taxpayer funded support and it’s important that as a group we work together to continue to ensure that those who want to take a free ride of the system, end the ride straight away.

I mentioned immunisation, I think this is a very important part of what we’re seeking to do and we’ve been very appreciative of the broad spread of support that has been in place for that new initiative particularly from Early Childhood Australia. I want to commend also the New South Wales state government and Mike Baird for the change that they introduced last year, as a regulator of centres across New South Wales, to also insist on those immunisation requirements and I want to challenge every state and territory that doesn’t have those arrangements in place to get them in place. It’s one thing for the government to insist on it as a condition of benefits, which we can do, but we don’t regulate these centres and here in New South Wales, they stepped up in terms of ensuring that safety for families and the parents who are making the right decisions for their children on immunisation and we want to see the other states and territories follow suit.

We won’t seek to introduce these measures overnight, as you know for those who have been particularly engaged in these consultations, we are very open on the issue of the transition timeframe and there are elements of this that we intend to introduce earlier and others that we will introduce later. We need families to have time to recondition their expectations and how they set up their own arrangements and so we won’t be rushing this in overnight. We’ve sought to be quite collaborative with opposition parties, I particularly want to thank Kate Ellis for the way that she has worked with me on this and congratulate Kate and David on the recent birth of their child down in South Australia. She’ll be experiencing first-hand the great services of this room in the very near future as my own family did over the last few years and so I think you’ve got two people particularly involved in the sector in making some decisions in this area who have quite a lot of first-hand knowledge and very recent experience. So that transition process I think is really important.

I want to conclude by saying thank you for the honest dialogue we’ve had to date, an honest dialogue I look forward to us continuing to have in the future to ensure that at the end of the day, we actually get a change here that makes a difference, a positive difference. It may not be everything on the shopping list of everyone in this room and it probably won’t be everything on my shopping list either and you always know it’s a good deal when you’ve got to a position like that. I look forward to engaging with the Opposition and the Crossbenchers as well to see this as a key measure and I look forward to making further announcements on this in the not too distant future. Thank you for your attention.