Finance Finance News Federal government pledges $305 million to assist with child care

Federal government pledges $305 million to assist with child care

Victorian families and child care providers will benefit from a new $305 million support package. Photo: Getty
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Parents looking to rejoin the workforce will have an easier time getting their children into care under a new $305.6 million support package.

Child care centres will also receive direct financial support under the Child Care Recovery Package announced by federal Education Minister Dan Tehan.

The additional funds have been welcomed by economists, but described as a “missed opportunity” to implement more valuable reforms.

Under the support package, federal government will extend the relaxation of the activity test, which determines how many hours of subsidised care families receive, until April 4.

This means families can receive up to 100 hours of subsidised care each fortnight if their activity hours (i.e. time dedicated to paid or unpaid work, study or starting a business) have been affected by the pandemic.

Victorian families will also be granted a fee freeze until January 31 in response to the ongoing lockdowns as the state battles with a second wave of coronavirus infections.

“Victorian families and providers will continue to be supported by the federal government so they can get back on their feet following the second wave,” Mr Tehan said.

Further financial support for Victorian providers

The package also includes direct financial support for Victorian businesses, including ‘recovery payments’ of 25 per cent of pre-COVID revenue until January 31.

These payments are available to centre-based day care, family day care and in-home care providers from September 28.

Outside school hours care providers will also receive this payment when in-school teaching begins again, and will be entitled to an extra payment of 15 per cent of pre-COVID revenues – bringing total support to 40 per cent of pre-COVID revenue.

The new payments will be made alongside a continuation of the child care employment guarantee, which Mr Tehan said will ensure the money passes to educators and employees.

“When this pandemic began, our government acted quickly to prevent the collapse of child care, keeping 99 per cent of services open across Australia,” Mr Tehan said.

“Around Australia, services at risk of imminent closure can apply for additional support through the Community Child Care Fund special circumstances program.”

Funding ‘blunt’, but welcome

Danielle Wood, chief executive of independent think tank The Grattan Institute, said anything federal government does to keep child care centres afloat is welcome.

But Sunday’s announcement is a “missed opportunity”.

“None of us want to see any businesses closing their doors, but child care centres have big flow-on ramifications for households and their ability to participate in the workforce,” she said.

The big problem facing the sector is the cost of care is too high for many battling Australian families to cover, forcing would-be workers to bow out of the labour market.

“A bolder policy move would have been to do something about those high out-of-pocket costs by boosting the childcare subsidy,” she said.

“It would put more money in the pockets of parents and households and increase workforce participation.”

Increasing the childcare subsidy would cost more than the new Child Care Recovery Package, but Ms Wood said it would boost GDP in the longer term too.

Modelling by the Grattan Institute in August found lifting the subsidy from 85 per cent to 95 per cent would cost government $5 billion, but generate $11 billion in GDP.

Ms Wood added this latest plan is a “blunt approach” that will help some childcare providers more than others.

“Some centres are going to be doing fine, particularly things like family day care where utilisation has stayed high,” she said.

“They’ll be getting the same level of top up as a childcare centre in a disadvantaged area where lots of parents pulled their children out because they can’t afford it.”

Long day care providers, and centres in geographical areas with high numbers of job losses will be the most at risk, Ms Wood said.

“It may be that for those centres, 25 per cent [of pre-COVID revenues] barely touches the sides,” she said.