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Why the Productivity Commission’s childcare report is a positive step forward

By Claire Braund | March 4th, 2015

Goodstart Early Learning’s claim that the cost of childcare will universally rise under the model proposed by the Productivity Commission Report into Childcare and Early Learning, needs to be viewed in context.

Goodstart is a not-for-profit company that owns and operates 641 childcare centres across Australia. It provides a valuable and high quality service to parents. It has also benefitted from the model established under the Howard government, whereby all parents receive a non-means tested Part B tax payment of up to $7,500 for each child in care, in addition to any Part A means-tested support they may receive.

When it took office, the Abbott Government asked the Productivity Commission to undertake a public inquiry into future options for childcare and early childhood learning, with a focus on developing a system that supports workforce participation and addressed children’s learning and development needs. Of the six items it was specifically asked to report on, only one was, “options – within existing funding parameters – for improving the accessibility, flexibility and affordability of childcare for families with diverse circumstances.”

The final report has made it clear that greater overall affordability requires additional government funding, a request which Minister Scott Morrison has said he will take to Cabinet.

However, its recommendations are essentially about redistribution of the current funding envelope. Indeed given these constraints, the report is a quality document which takes apart the complex tangle of spaghetti that Early Childhood Education and Care (ECED) has become, and refashions it into something more digestible.

A core premise is the need to make a cumbersome and over-regulated system with more than 20 Australian Government assistance programs – and a somewhat over-done National Quality Framework – simpler, more accessible and flexible. In other words, the sector is ripe for some disruptive innovation which may upset the status quo.

Key reforms proposed include:

· Extending the range of services approved for assistance to regulated in-home care.

· Removing the cap on occasional care places.

· Giving primary schools responsibility for outside school-hours care for their students, where demand exists for a viable service.

· Targeting assistance to low and middle income families through three priority areas:

1. A single child-based subsidy that is means and activity tested, paid directly to the family’s choice of approved services, for up to 100 hours per fortnight, and based on a benchmark price for quality ECEC.

2. Supports the inclusion of children with additional needs in mainstream services, delivery of services for children in highly disadvantaged communities and the integration of ECEC with schools and other child and family services.

3. Funds approved preschool programs on a per child basis, for all children, regardless of whether they are dedicated preschools or part of a long day care centre.

Setting the benchmark for ECEC is where the devil will be in the detail for the Abbott Government. The report found that of the 5% of families that reach the $7500 per child cap on CCR contributions to out-of-pocket costs, most of these use ECEC in central Sydney or Canberra and/or have children in care for over 40 hours per week. Modelling by NATSEM has shown pretty conclusively that the highest prices for childcare occurs in CBDs and close-in suburbs in Sydney, Melbourne and Canberra (up to $150 and $200 per day), while the remainder of the country remains at an average of around $80 per day. The latter generally do not offer ‘services with frills’ such as drama and dancing lessons which are available at some more costly centres.

It would be hard to argue that either these fees or level of additional services should inform a national benchmark for ECEC services. Neither would it serve the tax payer well if academic arguments about the level of degree qualifications being mooted for people caring for 0-2 year olds was taken into account when setting the benchmark for care.

Any such benchmark needs to be based on a reasonable cost of production, which is further compounded by the fact that many childcare providers are cross-subsidising the 0-2 age group (higher carer to child ratios) with fees from the 3-5 age group or after-school care. So the cost of production is not being truly reflected in the price.

Instead of the argument that it is not fair to set a national benchmark as some mid-city childcare services have to charge more because their property prices are higher (true for every industry one would think) being put by Goodstart Early Learning chief executive Julia Davison, it would be more useful to look at three separate benchmarks. This would more accurately reflect the cost of the service and inject some clearer price signals into the system.

Instead of arguing about the findings, Goodstart and others would be better placed welcoming the recommendations in the PC report and engaging in how our childcare system become more efficient and flexible, better suited to the changing needs of an increasing agile workforce and paid for on a needs basis rather than as a universal benefit.

This article was originally published at Women’s Agenda.

Tags: Childcare
Sectors: Government

Across the great divide – a tale of two Melbournes

By Jane-Frances Kelly | March 4th, 2015

Charles Dickens wrote his novel, A Tale of Two Cities, about London and Paris. A writer with similar ambitions today could easily stay in one city and write a tale of two Melbournes.

In one city, people live within 10 kilometres of the city centre, where there is almost one job for every resident, and public transport is close by and comes fairly frequently. This experience led The Economist to crown Melbourne the world’s most liveable city.

The inner suburbs, which from 2006 have soaked up more than two-thirds of the city’s employment growth, stand in stark contrast to the Melbourne more than 20 kilometres from the city centre.

These suburbs beyond Broadmeadows, Laverton, Springvale and Glen Waverley have just three jobs for every 10 residents. Outer suburban jobs also pay much less: across the nation, an average of $56,000 a year compared to $77,000 for those near the centre.

Yet today almost half of Melbourne’s population lives more than 20 kilometres from the city centre. And it is this outer Melbourne where most population growth is occurring. The increasing separation between jobs and people in our large cities is Australia’s great new divide, as a new book from the Grattan Institute, City Limits, reveals.

Distance from a good choice of jobs forces too many city residents into tough compromises. The pressure is acute in the outer suburbs, where residents spend 20 per cent longer commuting than people in the inner city. This is time not spent relaxing or with loved ones. Not surprisingly, people who spend more hours behind the wheel say they are less satisfied with their lives than people with shorter commutes.

Some outer suburban households find it impossible to hold down two jobs and raise children. In outer suburbs to the west, north and south-east of Melbourne, women’s workforce participation is more than 20 per cent below that of men. Often families have not chosen this life: a poorly connected city has forced it upon them. By contrast, there is little difference in male and female workforce participation in inner and middle suburbs such as Yarraville, Preston and Bentleigh.

Travel costs also strain household budgets; only housing and food are bigger expenses. Cars represent by far the largest part of travel costs. The further a household lives from the city centre the more cars it is likely to own, since there is usually no other way to get around.

More and better public transport would make a big difference to many people in the outer suburbs. It would also take the load off increasingly congested roads in inner suburban employment centres. But transport is not a panacea, and building more roads or train tracks is very expensive.

The most important thing governments can do is give people more opportunities to make the housing choices they would like to make.

Most new housing being built in Melbourne is either detached houses in outer suburbs or high-rise apartments in and around the CBD. Obviously, many people want to live in these housing types and locations, so it’s good that they can.

But many other households would be happy to trade off a smaller home for a more convenient location. They might want to live near other family members, stay connected to the community they grew up in, improve their access to jobs, or have a shorter commute. Grattan Institute research has found there are many people who would prefer to live in inner and middle suburbs of Melbourne, in semi-detached homes such as townhouses, or in flats in low-rise buildings.

At the moment, there are few opportunities to make these choices. It’s too hard and too costly to build more homes in places with good access to jobs. This contributes to rising house prices that put home ownership, or living near employment centres, out of reach for growing numbers of Melburnians.

Governments need to make it much easier to build new homes in inner and middle suburbs – especially the kinds of townhouses, units, terraces and low-rise flats many people have indicated they would like to live in.

The incredibly convoluted set of bureaucratic rules and processes involved in getting permission to build new homes would be a good place to start. The interests of existing residents and newcomers to established suburbs can be resolved. The cost, delay and complexity of current arrangements are widening the divide in Melbourne and leaving many residents with poorer lives. Governments can and must do better.

Jane-Frances Kelly and Paul Donegan are the authors of City Limits: why Australia’s cities are broken and how we can fix them (Melbourne University Press).

This article was originally published by Fairfax.

Photo Credit: David Iliff

Sectors: Government