Glossary

1. Introduction: The Child Care Package

This is the final evaluation report on the Child Care Package that was introduced by the Australian Government, in large part, in July 2018.

Due to the impact of COVID-19, some aspects of the evaluation of this program were curtailed, and the timing of the final report brought forward from mid 2021 to early 2021. Specifically:

• The evaluation focuses on the implementation and outcomes of the program to end December 2019, as after this date parents using child care and services were significantly affected by the pandemic and policy responses to it. In the case of child care, this included the introduction of an Early Childhood Education and Care Relief Package which operated from 6 April to 12 July 2020 and which included the suspension of Child Care Subsidy payments, a Transition Payment over the period 13 July to 27 September 2020 involving a reintroduction of the payments, and a Recovery Package commencing on 28 September 2020 and which was anticipated to continue to 31 January 2021.
• A number of data collection activities envisaged as providing central inputs into the final evaluation were not able to be conducted. This included not being able to undertake the third wave of the services survey.

1.1 The Child Care Package

In July 2018 the Australian Government introduced the 'new Child Care Package' through the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Act 2017. The new Child Care Package has 4 key elements:

• Child Care Subsidy (CCS) - the main form of Australian Government financial support to parents as a subsidy for child care costs
• Additional Child Care Subsidy (ACCS) - additional fee assistance directed at families and children who may face barriers in accessing affordable child care
• Inclusion Support Program (ISP) - support for services to build their capacity and capability to include children with additional needs in mainstream services
• Community Child Care Fund (CCCF) -enables grants to child care services to help them address barriers to participation and to support service sustainability, and funding for services in areas of high unmet demand.

The Additional Child Care Subsidy, Inclusion Support Program and Community Child Care Fund are collectively referred to as the Child Care Safety Net that provides additional targeted assistance for disadvantaged communities and vulnerable children and their families to address barriers to participation in child care and employment. The structure of the program is illustrated in Figure 1.

Figure 1: Structure of the Child Care Package

1.1.1 Program objectives

The Package's core objectives include addressing issues of affordability and increasing costs, improving flexibility and increasing the targeting of financial assistance, in particular, to support those parents who are working or looking for work.

This was articulated in the second reading speech by the Minister for Social Services as:

Almost one million Australian families will benefit as a result of this child care assistance package. Low- and middle-income families will be the greatest beneficiaries …

Together, these reforms will ensure that, in a fiscally sustainable way, we can achieve three important goals:

1. continue to assist families in raising their children and provide access to quality early learning opportunities over the long term
2. enable and encourage greater workforce participation; and
3. simplify our child care payments and social security systems …

Our objective is to help parents who want to work, or who want to work more, while still focusing on early childhood education.

Having two parents in paid employment has become the preferred choice for most families because of the changes in our society and economy over many years. More affordable access to quality child care puts the opportunity of work within far better reach of more families.

The Jobs for Families Child Care Package is designed to support more families, including jobless families, to increase their participation in work, training, study or volunteering. The government's significant investment is targeted to those who need it most - low and middle income families who are juggling work and parenting responsibilities. (Porter, 2016)

The policy was seen as a major initiative. Minister Porter referred to it as a 'once in a generation reform to child care' (Porter, 2017a), a sentiment reflected in the Departmental media release on the passing of the legislation:

This legislation gives effect to the most significant reform to the early education and care system in decades and will better target those who want work or work more. It will give around one million Australian families relief from out-of-pocket child care cost pressures and provide more children with the opportunity to benefit from early education.

Over the next 15 months, the Australian Government will implement a new child care system which is more affordable, accessible and flexible. (Department of Education, Skills and Employment (DESE), 2017)

1.1.2 Implementation

The Australian Government Department of Education, Skills and Employment (DESE)1 is responsible for the implementation of the Package, with the operationalisation of the CCS through the Centrelink element of Services Australia, an agency within the Social Services portfolio.

The Child Care Subsidy commenced operation on 2 July 2018. Its introduction was complemented by a new Information Technology system which was developed with the objective of providing a simpler interface for both parents and services, and to automate the payment system. This includes, as of January 2019, a requirement for services to report actual 'in' and 'out' times of children as part of sessional reporting.

Changes were also made to the child care services regulatory framework. These included a strengthened set of requirements that services need to comply with, including reporting on children's actual hours of attendance, as well as the removal of some requirements related to hours of operation.

Some elements of the Package were implemented prior to the introduction of the Child Care Subsidy, with the Child Care Safety Net being progressively rolled out from July 2016. At this time, the Inclusion Support Program was introduced, as was the Connected Beginnings program, which is part of the Community Child Care Fund. Another early element of the Child Care Package was the Nanny Pilot Programme, initially called the Interim Home Based Carer Subsidy Programme. A new In Home Care (IHC) program was introduced in July 2018, which replaced the previous In Home Care program and the previous Nanny Pilot Programme.

Since its initial implementation, a number of changes and other measures have been introduced. In addition to those associated with COVID-19, as detailed in the introduction, these include:

• A set of mainly technical reforms in a series of legislative instruments. Of note these included: an extension of the 'eight week' rule (see Chapter 3); increases in the In Home Care hourly rate (see Chapter 4); and the removal of the 50 per cent ACCS (Child Wellbeing) rule (see Chapter 7).
• Changes to the Inclusion Support Program, including revised guidelines issued in March 2020 and changes in the IT environment for this program.
• Additional emergency measures, mainly through the Community Child Care Fund (CCCF) program to support services adversely affected by drought and bushfires, but also including support for families in bushfire declared areas by exempting them from the CCS activity test for the financial year.

In addition to these, enhanced compliance activities in the child care sector, initially introduced in 2014, and mainly directed at addressing fraud and related misconduct, have been maintained. The impacts of these - in particular, with regard to Family Day Care services - are discussed in Chapter 9.

1.1.3 The Child Care Subsidy

The Child Care Subsidy (CCS) is the main element of the Package and provides targeted assistance with the cost of child care. The parameters of the system include:

• a cap on the hourly rate charged for child care to which the subsidy rate will apply
• a subsidy rate that declines as family income increases
• an annual cap on the total level of assistance paid to some higher income households
• a limit on the number of hours of care for which the subsidy is payable for each child based on an activity test applied to the parent(s).

In addition, parents are required to meet residency requirements, and the child must meet immunisation requirements, be aged 13 years and under, and not be attending secondary school.²

The change to the CCS also introduced the concept of a family co-contribution, so that families pay a portion of their child care fees.³ There are, however, intersections between this and the Additional Child Care Subsidy (ACCS), which tops up the subsidy for families and children facing barriers to accessing affordable child care (see discussion of ACCS below).

Notionally, the CCS is calculated as a direct offset to the charges that would otherwise be paid by the parents. However, in most cases, the actual subsidy paid to a provider is 95 per cent of the amount of CCS the parent is eligible for, as 5 per cent of parents' actual entitlement is initially withheld by government.⁴ After annual reconciliation, this withheld amount is either then paid to the family or is used to offset any debt they may have to the Commonwealth; in particular, where an underestimation of annual income has resulted in the subsidy being paid at an incorrect and higher rate.

• Key features of CCS are 3 parameters that determine the financial level of subsidy, and one on the quantum of child care that is subject to the subsidy.
• The hourly rate caps are a limit on the rate charged by child care providers that is subject to the subsidy. Where a provider charges a rate less than the cap, families will receive their applicable percentage of the actual fee charged, while where the rate charged is above the cap, the percentage applies to the hourly rate cap.⁵ As of 1 July 2019, the rate cap was: $11.98 for children below school age and $10.48 an hour for school-aged children in Centre Based Day Care and Outside School Hours Care; $11.10 per hour for Family Day Care, and on a per family basis $32.58 for In Home Care. These caps are to be indexed annually based on the All Groups CPI.
• The percentage of Child Care Subsidy rate is the proportion of the capped fee that is provided as a subsidy and is based on a sliding scale that reduces with family income. For 2019-20 the maximum rate is 85 per cent for families with an income of up to $68,163. The rate of assistance then tapers to 50 per cent at an income of $173,163, remaining at this rate up to a family income of $252,453, before again tapering to a rate of 20 per cent at $342,453, and holding at this rate until family income reaches $352,453.6 Families with an annual income at or above this amount have zero Child Care Subsidy entitlement. (See Figure 2).

Figure 2: Child Care Subsidy, rate of subsidy by family income, 2019-20

Source: Derived from program criteria

• The annual cap is the maximum level of subsidy that will be paid to a family in any one year. For 2019-20 it was $10,373 per child per annum and applies to families with a joint income over $188,163 (and less than $352,453) per annum.⁷ For families with lower incomes there is no cap.
• The activity test operates to restrict the number of hours of Child Care Subsidy a family is entitled to, on a per child per fortnight basis, with the number of hours being determined by the level of 'recognised activity' parents are engaged in. Reflecting the program's focus on participation, and employment in particular, 'recognised activity' includes: paid work; self-employment; unpaid work in a family business; looking for work; volunteering; and studying. When applied to couples, the test is based on the hours of activity of the member with the fewest hours. There are a number of exemptions to the activity requirement for some families. Table 1 illustrates the operation of the activity test and details the main exemptions.

1.1.4 The Child Care Safety Net

The 3 elements of the Child Care Safety Net have been identified above. The specific objective of these is described by the Department as giving 'the most vulnerable and disadvantaged children, as well as those from regional and remote communities, a strong start through access to quality early childhood education and care' (DESE, 2020a).

Additional Child Care Subsidy

The Additional Child Care Subsidy (ACCS) is a top-up payment to the Child Care Subsidy. It provides additional fee assistance to families and children facing barriers in accessing affordable child care. As with the Child Care Subsidy, it is paid to services as an offset to the charge on parents. It has 4 components:

• ACCS (Child Wellbeing) is for children who are at risk of serious abuse or neglect.
• ACCS (Grandparent) supports grandparent primary carers, who receive an income support payment.
• ACCS (Temporary Financial Hardship) is short-term increased child care fee assistance to families who, due to exceptional circumstances, are experiencing significant financial stress with the cost of child care.
• ACCS (Transition to Work) is for parents who are transitioning from income support to work by engaging in work, study or training activities.

With the exception of the Transition to Work element, the subsidy is equal to the actual fee charged (up to 120 per cent of the hourly rate cap), and is provided for up to 100 hours per fortnight without an activity test. In the case of the Temporary Financial Hardship element, the activity exemption applies for a maximum of 13 weeks per financial hardship event. Under the Transition to Work element, the subsidy is equal to 95 per cent of the actual fee charged (up to a rate equal to 95 per cent of the hourly rate cap), with the number of hours of subsidised care being determined by the individual's activity test result, while the duration of assistance varies with the activity undertaken. In addition, the subsidy can continue for a further 12 weeks if parents gain employment and their income support payments cease. Assistance under the Child Wellbeing provision can be initially granted for 6 weeks on the basis of a certificate issued by the service provider, and for renewable periods of 13 weeks on the basis of a determination by Services Australia.

Inclusion Support Program

The Inclusion Support Program provides support to early childhood and child care services to build their capacity and capability to include children with additional needs in mainstream services. It commenced in July 2016 and replaced the previous Inclusion and Professional Support Program. It aims to increase the proportion of children with additional needs attending mainstream services, improve the capacity of the sector over time and ensure parents of children with additional needs have access to appropriate and inclusive child care services.

Under the program, support is provided to services to enable them to provide inclusive approaches to the provision of child care. This includes, but is not limited to, inclusive practices for children who may have additional needs as they:

• have a disability or developmental delay
• are presenting with challenging behaviours
• have a serious medical or health condition, including mental health
• are presenting with trauma-related behaviours.

And in meeting the needs and requirements of:

• Aboriginal and Torres Strait Islander children
• children from culturally and linguistically diverse backgrounds
• children from refugee or humanitarian backgrounds.

The program operates through 7 state/territory-based Inclusion Agencies (essentially community-based organisations), along with a national Inclusion Development Fund Manager responsible for the management of the Inclusion Development Fund. Support under the Inclusion Support Program is implemented through Inclusion Professionals, employed at the Inclusion Agencies. These agencies undertake a range of roles in providing support to services to generally develop more inclusive approaches, support in the development of Strategic Inclusion Plans, and specific in providing support to assist services address barriers that individual children or groups of children may face. Inclusion Agencies operate equipment libraries for use by services.

There are 4 streams of funding available through the Inclusion Development Fund:

• A subsidy for an additional educator in centre-based services to support ongoing high support needs, prioritised to assisting children with a diagnosed disability.
• A subsidy for immediate/time-limited (up to 8 weeks¹²) support for centre-based services where there is an immediate barrier to enrolling a child with disability or other additional needs and while an alternative and more stable solution is being determined.
• Top-up support for Family Day Care services where an educator is unable to enrol the maximum number of children they are permitted to because of the demands on the educator of including a child with a disability or high care needs.
• Innovative Solutions Support that allows all service types to receive financial support for creative solutions to address barriers to inclusion.

Services wishing to access financial support through the Inclusion Development Fund must first develop a Strategic Inclusion Plan, except those applying for immediate support. The Strategic Inclusion Plan, developed through collaboration with the Inclusion Agency, outlines the current inclusion practices of the service, barriers to inclusion, and strategies to address those barriers. It may also involve inclusion-related training, development of policies and procedures, sourcing resources from the local community, changes to educators' planning and pedagogy, and modifications to the child care and early learning environment. While part of this evaluation, it is noted that some aspects of the evaluation of the Inclusion Support Program are continuing beyond the scope of this report.

Community Child Care Fund

The Community Child Care Fund (CCCF), the third element of the Child Care Safety Net, provides grants to child care services to help them address barriers to participation. The purpose of the fund, as described in 2017 by the then Minister for Education and Training, was to help 'new and existing services, particularly in rural, regional or vulnerable communities, to reduce the barriers for families to access those services and to increase the supply of places in areas of high, unmet demand' (Birmingham, 2017). More specifically the fund is designed to:

• reduce barriers in accessing child care, in particular for disadvantaged or disadvantaged and vulnerable families and communities
• provide sustainability support for child care services experiencing viability issues
• provide capital support to increase the supply of child care places in areas of high unmet demand.

One specific objective of the program is to assist former Budget Based Funded services to transition to the new child care arrangements.

The program has 3 components:

• CCCF Open Competitive Grants: These are available to eligible, approved child care services and are intended to supplement fee income. Eligibility targets services operating in selected disadvantaged communities, with funding awarded for up to 5 years.
• CCCF Restricted Non-Competitive Grants: To help eligible former Budget Based Funded services (and a small number of other services, see Section 9.7) to build capacity and operate sustainably under the new child care system and support services to increase participation by Aboriginal and Torres Strait Islander children.
• Connected Beginnings: To help Aboriginal and Torres Strait Islander children in areas of high need to be well prepared for school by supporting pregnant Aboriginal and Torres Strait Islander women and Aboriginal and Torres Strait Islander children from birth to school age. Connected Beginnings has operated since July 2016 and provides support to integrate early childhood, maternal and child health, and family support services with schools in a selected number of Aboriginal and Torres Strait Islander communities experiencing disadvantage. This program is jointly funded and implemented by the Federal Departments of Education, Skills and Employment, and of Health, with an annual budget of around $12 million. While Connected Beginnings was separately evaluated, the findings from this have been drawn upon in Chapter 7.

1.1.6 Former child care funding model

Prior to the Child Care Package, there were 2 main forms of child care assistance: the Child Care Benefit (CCB) and Child Care Rebate (CCR).

CCB was a means tested benefit covering up to 50 hours of approved child care use per child per week provided that parents satisfied an activity test of at least 15 hours per week. Families that did not meet the activity test were eligible for CCB for up to 24 hours of child care per child per week. The maximum rate of CCB was $4.30 per hour for a non-school child ($215 for a 50-hour week), and 85 per cent of this rate for a school-aged child. The maximum rate of Child Care Benefit was payable for families with an annual income under $45,114 or families on income support with the rate then reducing up to a limit of $156,914 for a family with one child in care, with this cap increasing with the number of children.

In addition, parents were eligible for CCR. This was a non-means tested payment that provided up to 50 per cent of a family's out-of-pocket child care expenses (after CCB was deducted) to a maximum of $7,613 per child per year. To be eligible for the rebate, parents were required to have had some work, training or study related commitments during the week, although there was no minimum number of hours of such activity required.

There were a range of different payment options available to parents, including whether assistance was paid directly to services as an offset to fees, or was paid to parents periodically or annually. CCB was subject to an annual reconciliation process as it was paid on the basis of estimated income.

These payments were complemented by a range of other assistance including Jobs, Education and Training Child Care Fee Assistance, and Special and Grandparent Child Care Benefit, and the Community Support Program, the In Home Care and Nanny Pilot Programs and the Inclusion and Professional Support Program. Additionally, some child care services, including non-mainstream services in rural, remote and Aboriginal and Torres Strait Islander communities, were directly funded under the Budget Based Funded Program.

1.1.7 Other changes

The introduction of the Child Care Package also involved some structural and related changes.

Service classification

There was a consolidation of types of child care service. Specifically:

• Long Day Care services and Occasional Care Services were classified together as Centre Based Day Care Services.
• Before-School, After-School and Vacation Care services were grouped together as Outside School Hours services (in many cases involving what had been previously treated as 3 separate services even where they were run by the same organisation now being seen as a single service).
• Budget Based Funded (BBF) services were reclassified on the basis of their type of service - typically Centre Based Day Care services or Outside School Hours Care Services.
  • The funding changes, along with this classification, also resulted in those children attending these services being recorded in the Child Care IT environment.

For ease of analysis, reporting about services uses the new classification even when reporting on child care prior to July 2018, except where there is specific analysis relevant to one of the old sectors.

In particular, some dedicated analysis of the former BBF services is presented in the report, given the need to explore the transition experiences and outcomes for those services. These services were eligible for CCCF-restricted funding upon transition to the Child Care Subsidy. However, the former BBF services were identified in survey and interview data to allow a focus on them, separate to other services in the Child Care Package that are eligible for CCCF-restricted grant funding.

Program nomenclature and change

Additionally, it is noted that while there appear to be a number of analogues between the old and new program environments, there are frequently considerable differences in the actual nature of the programs. This applies in particular to:

• In Home Care under the new arrangements and the former In Home Care Programme and Nanny Pilot Programme
• Additional Child Care Subsidy (Child Wellbeing/ Grandparents/Temporary Financial Hardship/ Transition to Work) relative to the Jobs, Education and Training Child Care Fee Assistance, and Special and Grandparent Child Care Benefit programs
• the Inclusion Support Program and the former Inclusion and Professional Support Program.

Priority placement

The introduction of the new program saw the removal of the 'Priority of Access Guidelines' that services were required to use to allocate available places. These identified 2 priority groups: Priority 1 - a child at risk of serious abuse or neglect; and Priority 2 - a child of a single parent who satisfies, or of parents who both satisfy, the work, training, study test, and a need to provide within these groups and in enrolling children outside of these groups, priority to: Aboriginal and Torres Strait Islander families; families that include a disabled person; low income families and those on income support; families from a non-English speaking background; socially isolated families; and single parent families.

1.2 The broader environment

The child care program operates in a wider context and there are interactions between it and other interventions. Three of particular note are:

• quality monitoring and assessment
• preschool education
• preschool education

1.2.1 Quality monitoring and assessment

The day-to-day monitoring of the quality of child care provision is a state/territory government responsibility being undertaken by these governments, usually through education departments or agencies. The activity fits into a broader National Quality Framework (NQF) that includes the Australian Children's Education and Care Quality Authority (ACECQA), an independent national authority, that assists governments in administering the framework; National Quality Standards (NQS) that establish a national benchmark for the provision of quality services across 7 areas, which then feed into the national quality rating system under the aegis of ACECQA; and the Education and Care Services National Law (National Law) and related regulations that form a national system for the regulation and enforcement of the NQS. While nationally consistent, this law is legislated individually in each state or territory.

A total of 15,004 Early Childhood Education and Care (ECEC) services were rated under the NQF in Q4 2019. Of these 12,007 were child care services, with the others being preschools and kindergartens. The NQS quality ratings of child care services are considered in Chapter 2.

1.2.2 Preschool

The Australian Early Childhood Education and Care system encompasses both preschool and child care. The relationship between these functions, and the way in which they are delivered, varies significantly across the country. This is illustrated in Table 2. While in some states/territories including South Australia, Western Australia, Tasmania and the Northern Territory, preschool education mainly takes place in the education system, in New South Wales and Queensland it is overwhelmingly delivered in the child care sector, with this largely also being the case in Victoria, although that state also has a strong independent community based preschool sector.

Source: Australian Bureau of Statistics: Preschool Education, Australia, 2019

The nature of preschool provision within child care services was one of the aspects of the pre-transition child care structure examined in the Baseline Survey of Early Learning and Care Services (SELCS)13 undertaken in April 2018. Across services as a whole, excluding Outside School Hours Care where most children were of an older age group, 88.4 per cent of those responding that had children in the preschool age group reported providing a preschool or kindergarten program for children in the year before full-time school. Among Long Day Care services¹⁴ this proportion was 93.7 per cent, with a further 3.0 per cent arranging access to a program run externally. Just 3.3 per cent said they made no provision. Across the Family Day Care sector, 35.5 per cent reported having a program, with 33.6 per cent arranging access to an external program, almost a third (30.9 per cent) said they made no provision.

Nationally there is a commitment to 'universal access' to preschool. This seeks to ensure that a quality preschool program is available to all children in the year before full-time school. While states and territories are responsible for the provision of preschool, the Commonwealth provides funding as a contribution to 'top up' arrangements and to ensure families have nationally consistent access to 15 hours per week, or 600 hours per year, in the year before school. This is complemented in those cases where the preschool program is provided in a Centre Based Day Care service by support via the Child Care Subsidy, which allows families who do not meet the activity test to obtain 36 hours of subsidised care per fortnight for a preschool-aged child who attends preschool at a centre-based day care service. Parents are still required to meet the income test to obtain this assistance.¹⁵

As noted above, the role of ACECQA extends across both the child care and preschool sectors.

1.2.3 NDIS

Inclusion is a key objective of the Australian child care system. Under the Package this is supported by access to the Additional Child Care Subsidy, the Inclusion Support Program and the In Home Care program. Children who have an impairment, serious illness or condition that is likely to be permanent are also potentially eligible for support through the National Disability Insurance Scheme (NDIS). A specific objective of the NDIS is investing in people with disability early to improve their outcomes later in life.

The NDIS has been rolled out across Australia, commencing in 2013, including from the rolling out of the specific Early Childhood Early Intervention (ECEI) approach that began in 2016. This measure supports children aged 0-6 years who have a developmental delay or disability and their families and/or carers, with a focus on providing supports to families to help children develop the skills they need to take part in daily activities and achieve the best possible outcomes throughout their life. The approach is currently under review and it is anticipated that an implementation reset process will be finished by mid-2021.

With respect to child care, the focus of the NDIS is on providing 'individualised supports to enable a child to attend an early learning service'. The program approach, however, limits this to those 'situations where a child has very significant and complex care needs that are beyond a reasonable expectation for child care services to provide. For example, a child requiring ventilation, which must be supervised by a trained carer or nurse' (NDIS, 2014). With the exception of these specific circumstances, the early childhood and child care services have responsibility for the education and care needs of children, including children with disability or developmental delay.

1.3 The evaluation

The Australian Institute of Family Studies in association with the Social Research Centre, the UNSW Social Policy Research Centre and the ANU Centre for Social Research and Methods were commissioned by the Australian Government Department of Education, Skills and Employment to undertake an independent evaluation of the new Child Care Package. The evaluation commenced in December 2017, prior to the introduction of the Package, and was expected to continue until June 2021. The In Home Care program and the Inclusion Support Program, in addition to being within the overall evaluation scope, are subject to separate reporting, with as noted some of the Inclusion Support Program evaluation continuing past the date of this report.

As noted in the introduction, the evaluation was disrupted by COVID-19 and associated restrictions, as well as changes to government assistance to families and the child care sector, and as a consequence this report only considers outcomes to the end of 2019. This focus, while bringing some constraints as to what was able to be done and limiting the capacity to identify longer-term consequences of the introduction of the Package, ensures that the outcomes and impacts reported on are those that relate to the Package itself, and not the consequences of these other interventions, nor the evolving circumstances in which services operate.

In particular, it is noted that because of disruptions to the sector, it was not possible to undertake the third wave of the Services Survey that was designed to better understand the impact of the Package on service operations, rather than the more transitional experiences that dominated the earlier waves.

The evaluation is guided by the Evaluation Framework that was agreed with the Department.16 The Evaluation Framework, as detailed in Figure 3, sets out 4 key outcomes and 3 key impacts against which the new Child Care Package is being evaluated. These reflect the policy objectives set by the government for the Package. In large part, they relate to medium to long term effects of the Package and its consequences for families, children and the child care sector.

Figure 3: Evaluation Framework

1.3.1 The evaluation approach

The primary focus of the evaluation, as detailed in the evaluation framework, is on the outcomes and impacts of the Child Care Package. This contrasts with other evaluative tasks, such as process or implementation evaluation, that are more concerned with the way in which programs are implemented and the extent to which implementation has occurred as intended and whether the program has been fully and properly implemented in accord with its guidelines and procedures. Notwithstanding this focus, Chapter 10 addresses questions of implementation in the context of the transition to the new program.

In undertaking the evaluation, it is noted that a number of balances have needed to be struck in the approach. These include the degree to which comparative or absolute outcomes and impacts are considered, the effective weighting of positive and negative outcomes, the extent to which outcomes and impacts can be attributed to the policy and program changes, and the degree to which the time scale of this report and the data available to the evaluation can fully identify the effects of the program. Additionally, there are questions concerning the nature and role of child care provision that are not necessarily wholly reflected in the evaluation framework. These are considered further below.

Comparative and absolute outcomes

In large part, the focus of the evaluation is comparative. That is, comparing the outcomes and impacts being achieved following the introduction of the Package, relative to those under the previous arrangements. In terms of affordability, for example, this is a focus on whether child care is more affordable to families under the CCS than it was under CCB/CCR. This approach reflects the fact that few of the concepts can be measured in purely absolute terms, or where the metrics of an absolute measure - for example, what constitutes 'affordable child care' - tend to be value laden.

At the same time, consideration of absolute outcomes in some cases is also important. For example, treating access in purely relative terms, when it comes to questions such as access for disadvantaged groups, ignores the important social imperative to ensure that children at risk have access to appropriate child care and related services.

Balancing of outcomes

Some aspects of the new child care policy have the potential to have differential impacts across the population, benefiting some, and disadvantaging others, in either absolute or relative terms. In the evaluation both of these are important, and care needs to be exercised in not just focusing on average effects but also the distribution of these. Such a focus, however, tends to limit the ability to draw concise, as opposed to more extended, nuanced findings that take account of these diversities. While, alternatively, some summative measures can be considered, these involve a range of potential value judgements about how to weigh gains and losses, including the extent to which these may be recorded by quite different population subgroups. In some cases, though, it is noted that program objectives, such as the refocusing of assistance from higher income families to those on lower and middle incomes, provides a normative weighting for such considerations.

Attribution

Attributing changes in outcomes to the effect of the Child Care Package can be problematic. For example, parents' perceptions of affordability may be affected by changes in their income and in other expenses - as well as, more widely, by perceptions of their financial circumstances and opportunities. Similarly, changes in employment can result from changes in the labour market and the demand for labour, as well as other policies such as the rates and conditions related to income support, and shifts in attitudes relating to parental workforce engagement. Disentangling the roles of each of these factors is difficult; in particular, as there is no counterfactual, control population that can be used as a reference point, as the policy applies to the entire parental population. While not all parents use the assistance, given that take-up is impacted by individual circumstances, attitudes and aspirations, these operate effectively as a selection effect that renders non-user parents unsuitable as a comparator. Additionally, as will be discussed in Chapter 8, the impact of the program needs to be considered across parents as a whole.

More widely, other policies, including universal access to preschool and its interaction with different state preschool systems, the introduction of the National Disability Insurance Scheme, and a wide range of other initiatives all, in turn, also have impacts on the outcomes of populations of children and families who use child care. The interaction of these confound any attempt to attribute changes to child care programs alone.

Time scale

The evaluation is considering the impact of the introduction of the Package over an 18-month period, with much analysis, due to potential seasonal effects, the more limited focus of the November 2019 DESE ORIMA parent survey and the curtailment of the evaluation specific services survey, being restricted to a 12-month period. Little information is available to assess whether this time scale is sufficient to fully identify the impact of the program. Two potentially sensitive dimensions relate to the impact on labour force engagement where people may either plan an engagement trajectory over time or where changes in their engagement are triggered by external factors, such as a job loss or a specific job offer.

The role of child care

As identified earlier, the rationale for the Package was described as having the objective 'to help parents who want to work, or who want to work more, while still focusing on early childhood education'. The 2 elements of this statement reflect 2 facets of child care. Given the evaluation framework, and the overall legislative intent as described by the Department 'that, in relation to early learning and child care, the primary role of the Australian Government is to provide families with financial assistance to help cover the cost of child care, while supporting workforce participation' (DESE, 2020b, p. 2) the focus of the evaluation is primarily on the first, and even to the extent to which questions such as access are considered, the orientation of the framework is on achieving access - not what access provides.

We address this further in our concluding chapter.

Terminology

In describing the sector, we have chosen to use the language of 'child care' rather than the alternative of 'early childhood education and care'. This decision was based on 3 grounds:

• the terminology of the main program element, the 'Child Care Subsidy', and of the legislation Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Act 2017
• the extent to which the evaluation, as noted above, is directed at the child care role, rather than the content of early childhood education
• the wider scope of the concept of 'early childhood education and care' that encompasses the preschool sector, and indeed some would also argue the early years of formal schooling.

Data and analysis

The evaluation draws very extensively upon administrative data provided by the Department; in particular, weekly records of child care use, surveys of parents, including one of the Department's surveys as well as those undertaken by the consortium, 2 major waves of surveys of services, a series of case studies, and extensive consultations. From these sources the evaluation has had a rich collection of quantitative and qualitative data that is reported on here. Data sources are described in detail in Appendix 1.

In addition to the direct reporting and interpretation of this data, the evaluation also undertook a major modelling exercise, reported on in Chapter 4, of the impact of the package on affordability.

1.3.2 Structure of report

This report is largely structured around the outcomes and impacts identified in the framework, specifically:

• Chapter 2 'Child Care in Australia' provides an overview of the child care system and of the state of child care at the end of 2019.
• Chapter 3 'Simplicity' addresses the second identified outcome - that of the simplicity of the system; in particular, for parents and services.
• Chapter 4 'Child Care costs, subsidies and affordability' responds to the third identified outcome - the affordability of child care. This also has implications for the third impact - that of the sustainability of the child care funding, although we note that the substantive consideration of this is for government, which needs to weigh up decisions on priorities both in expenditures and revenues.
• Chapter 5 'Flexibility' addresses the second half of the first outcome.
• Chapter 6 'Access' encompasses the second half of the first outcome.
• Chapter 7 'Vulnerable' focuses on the second impact, as well as aspects of these groups' experiences as identified in the first and third outcomes.
• Chapter 8 'Employment participation impacts' addresses the first impact. It also covers some of the specific aspects of the safety net programs, including ACCS.
• Chapter 9 'Viability and robustness of the industry sector' addresses the fourth outcome and informs on the third impact. The Chapter also discusses the operation of the CCCF and the impact of compliance activity.
• Chapter 10 'The transition to the Child Care Package', in contrast to these other chapters that are concerned with program outcomes and impacts, focuses on the processes of the transition, the experiences of services and families and of the policy responses to these.
• Chapter 11 'Conclusions and recommendations' presents the conclusions of the evaluation and recommendations for consideration drawn from these.

The evaluation framework also identified a series of cross-cutting issues, including the different sectors of child care provision, geographic outcomes, and the experiences of different families, as well as the effect of different program elements. In general, these are discussed across the chapters.

Appendix 1 'Evaluation process and data' reports more fully on the evaluation activities undertaken and the data sources drawn on, including those used in this report.

2. Child Care in Australia

This chapter describes the Australian child care sector during the period covered by the evaluation, including key statistics on the sector and the families and children who used child care services at the end of 2019. It also reports on the families' level of satisfaction with the child care services they receive, and how this has changed during the period since the introduction of the Child Care Package. This can be seen as an important metric for considering the impact of the new policies. The Chapter draws heavily on administrative data held in the Child Care Subsidy System and the DESE/ORIMA parent survey.¹⁷

2.1 The child care system

2.1.1 The structure of the system

The Australian early childhood education and care system, and the role of child care services within this, is complex. The Commonwealth Government provides subsidies to most parents who use child care. It also provides direct funding to services for specific activities, such as the inclusion of children with additional needs, and support to services in particular circumstances, including in some disadvantaged areas and other areas of need. State and territory governments regulate the sector,¹⁸ with local government also having a role including with regard to planning approvals. Jointly the Commonwealth and the states and territories agreed, in 2008, to a National Partnership Arrangement with the introduction of a national framework, Belonging, Being, Becoming - Early Years Learning Framework, in 2009. Standards in the sector are monitored and reported on, and qualifications assessed, by the independent Australian Children's Education and Care Quality Authority (ACECQA). The actual assessment and rating of the services is undertaken by the relevant state or territory regulatory authority. In addition to the formal child care sector, there are a range of private arrangements, some non-commercial and voluntary, such as care by relatives, and more commercial arrangements, including families who employ nannies and au pairs to care for their children. These are outside of the funding arrangements considered in this evaluation.

In addition to the provision of child care services as considered in this evaluation, as noted in Chapter 1, the Australian Government provides financial support for preschool education.¹⁹ In some cases, these services are provided within the formal child care sector and, in other cases, within state education systems or through private or community based providers.

Formal child care services are provided through a range of providers in the private, community and government sectors. For the purposes of the operation of the child care subsidy, and of the analysis undertaken here, 4 types of care services are identified:

• Centre Based Day Care: Services that typically offer long continuous sessions of care within services primarily focused on the early childhood education and care needs of children aged between 0 and 6 years. These services, as with those of other care types, operate both as individual services and as part of larger provider organisations. This also includes some services, classified as Occasional Care Services prior to the introduction of the Package, that provided shorter sessions of care. Many of these services continue to promote themselves as providers of occasional care including short sessions of care, and, or casual child care.
• Family Day Care: This care is provided to a small number of children by individual educators, in most cases, in the educator's own home. These educators are usually contracted, or employed, by a Family Day Care provider (which constitutes the 'service' in subsequent analysis of this sector) that manages a number of individual educators, with some larger services having over a hundred educators.²⁰ This structure means that, in contrast to Centre Based Day Care and Outside School Hours Care, the actual services are not usually directly engaged in the provision of care to children. Additionally, the geographic location of the service does not necessarily relate to the actual locations where care is provided by individual educators.
• Outside School Hours Care: These services usually offer shorter sessions of care immediately before and/or after school hours, and/or longer sessions during school vacations. These services have programs focused on the developmental and supervisory needs of school-aged children.
• In Home Care: This is a small sector that provides care to children for whom other forms of care are not suitable or accessible. This may be because of parental working arrangements outside of normal child care hours, due to geographic isolation including rural and remote locations, and where families have challenging or complex needs.

The structure of Commonwealth financial support for child care has been detailed in Chapter 1.

2.2 Child care in Australia - services and users

Over the course of Q4 2019, 1,327,238 children attended 13,118 child care services in Australia.²¹ Across the whole of the 2019 calendar year 1,579,459 individual children were recorded as using a child care service at some point.²²

In presenting this overview it is noted that in addition to the complexity of the sector, at times the data and concepts reported on are complex or definitions are particularly nuanced. For example, a single child may attend multiple child care services, of different types, for different periods, even within a single week. For some children, the different care, or indeed even sometimes different sessions of care within a single service, may be funded by different parents who live in separate families. Similarly, while some providers only manage services providing one form of care, others manage several different types. Additionally, some services and providers operate across state and territory borders and in different locations in states and territories, or indeed provide services across a state or territory, rather than in a more limited geographic location. As noted in Appendix A, there are also some limitations imposed by the nature of much of the data used due to it being administrative by-product data rather than being specifically collected or curated to be used for the purposes of analysis or evaluation.

2.2.1 Structure of provision - services

The broad structure of the sector is shown in Table 3. The data is presented on the basis of the sectors as identified above, and whether or not the service is provided by for-profit or not-for-profit providers. (This differentiation is made as it may be considered that the motivations of these may differ, and this in turn may result in differential outcomes.) At the same time, however, such a classification conceals many differences within each of these sectors, with for-profit providers ranging from listed companies to small family businesses, and the not-for-profit sector ranging from very large social enterprises to local governments and small community-based organisations.

Table 3 illustrates how different measures can lead to different assessments/impressions of the relative contribution of different forms of care and different sectors. For example, the largest group of services identified in the table are for-profit Centre Based Day Care services. These represent 42.5 per cent of services and are attended by 40.7 per cent, of the children who attend child care services, they provide however 56.7 per cent of the total hours of care. Family Day Care services also disproportionately provide a much higher volume of services relative to the actual number of services. The contrary is the case of Outside School Hours Care sectors, where the proportion of hours of care provided is low relative to the proportion of services and children attending.

Notes: ^a Proportion based on the number of unique child service records in the quarter. ^b Proportion based on the number of attended hours recorded in the quarter.

Source: DESE administrative data

Services and providers

While 37.5 per cent of services operate as independent entities, the remainder are parts of a larger provider structure,²³ with the largest providers having over 600 services. As illustrated in Table 4, the role of large providers is particularly significant in the for-profit Outside School Hours Care sector, along with the not-for-profit Centre Based Day Care Sector. This latter reflects the role of Goodstart, a social enterprise established in the wake of the collapse of the private provider ABC Learning in 2008.

Source: DESE administrative data

Service size

The size of services varies. While services, on average, have around 80 individual children attending in most weeks, 25 per cent have fewer than 50 children, while 25 per cent have more than 120. These counts, however, do not provide the whole picture. The level of services provided is also impacted by the intensity of use, with some of these children only attending on some days, or for limited periods. Table 5 presents a conceptual description of effective service size based on a measure of the average number of 'effective places' (a measure that seeks to account for the number of children who only attend for some days of the week).^24,25

As shown, just under a quarter of services have under 25 effective places, with these being particularly significant in the Outside School Hours Care and In Home Care sectors. Additionally, some 35 per cent of services have 25-49 places, a third between 50 and 99 places, with the remaining 8.7 per cent being larger. This though varies by type of service.

While, as noted, actual Family Day Care services are usually provided by single educators in their own home to a small number of children, these educators operate within the aegis of a larger Family Day Care service and, as such, the service size represents this organisational structure rather than the nature of actual child care service provision. In contrast, while In Home Care services operate a similarly dispersed network of educators who provide services to individual families in their own home, the specialist nature of these services tends towards smaller service sizes.

Notes: ^a Places have been derived by estimating the number of children who could attend a service if they all attended each day of the week over which the service operates. This is a conceptual volume measure of the level of service provision and does not necessarily relate to the number of approved places that a service has, or the maximum number of children who attend the service at any one time.

Source: DESE administrative data

Service location

Most, 67.6 per cent, of child care services are located²⁶ in the capital cities of states and territories, see Table 6. There is some variation in the geographic distribution of services by sector, with a higher proportion of Family Day Care and In Home Care services in smaller urban areas and inner regional areas. There are also significant differences between states and territories, reflecting their different patterns of settlement. In particular, in Western Australia and South Australia, some 80 per cent of services are in the capital city, as are 75 per cent of those in Victoria, and over 99 per cent in the ACT.²⁷ In contrast in the Northern Territory 28.3 per cent of services are in non-urban locations, as are 23.7 per cent of services in Tasmania. The implications of these distributions are considered more in Chapter 6.

Notes: ^a The geography used in this, and subsequent, tables is a hybrid based on a combination of ABS Significant Urban Areas (with the added differentiation between the state and territory capitals and other major urban agglomerations) and the distribution of areas outside of these cities according to the ABS remoteness classification. In all cases the location is based on the geographical SA2 level.

Source: DESE administrative data

Most of the services operating in Q4 2019 have been established for some time. The measurement of the duration of operation is, however, difficult, as changes in ownership, with little impact on the service itself, can result in the services being identified as 'new', while an existing service may take on quite different characteristics with; for example, a new director. Based on data on child attendance since January 2017, 77.3 per cent of services that operated in Q4 2019 have been in operation since that date, 5.2 per cent had a commencement date later in that year, 9.3 per cent commenced in 2018, and 8.2 per cent in 2019. By type of care the highest proportion of long-standing services was in the Family Day Care sector where 90.6 per cent of services operating in Q4 2019 were operating in January 2017. This was followed by the Outside School Hours Care sector (77.6 per cent), Centre Based Day Care (76.3 per cent) and In Home Care (76.2 per cent).

Service quality

The quality of ECEC services are, as noted earlier, assessed by the states and reported on by ACECQA against the National Quality Standards. In their 2019 Annual Performance Report the Agency reported that: 'The proportion of children's education and care services rated "Meeting NQS" or above has increased every year since the NQF was introduced' (ACECQA, 2019, p. 6).

This pattern of improvement is reflected in data over the period from Q2 2018 to Q4 2019. While, as shown in Figure 4, there has been an apparent fall in the proportion with the highest quality ratings,²⁸ this reflects a change in the classification system. The agency reports that this makes it 'more challenging for a service to achieve a rating of Exceeding NQS' (p. 7). Change over the period can hence be seen better in terms of the proportion of services rated as meeting or exceeding the standards. This has increased from 74.2 per cent in Q2 2018 to 76.6 per cent in Q4 2019. In both periods the number of services rated as 'significant improvement required' is very small, 0.2 per cent in Q2 2018, and 0.1 per cent in Q4 2019.

Figure 4: Rating of child care services against the National Quality Standards, Q2 2018 and Q4 2019

Notes: ^a Not visible on chart, only 0.2 per cent of services in Q2 2018 and 0.1 per cent in Q4 2019. Includes Family Day Care, Centre Based Day Care and Outside School Hours Care services only as In Home Care Services are out of scope. Excludes services without an overall quality rating.

Source: ACECQA, Quarterly National Quality Standard Data (Q3 2013 - Q4 2019) Released on 6 February 2020 (ACECQA, 2020a).

Further analysis of the ratings indicate some systematic differences across the sector. Table 7 illustrates some of these. Of note are the very marked differences between the for-profit and not-for profit sector, and between service types. While 39.3 per cent of not-for-profit Centre Based Day Care services have a rating of Exceeding NQS or Excellent, this rate falls to just 4.8 per cent for for-profit Family Day Care services. In general, the differences between the for-profit and not-for-profit sectors are most marked in the Family Day Care and Centre Based Day Care sectors, while the Outside School Hours sector is more marked by its relatively low rating relative to the other 2 sectors, than the difference between for-profit and not-for-profit providers.

Notes: Total is Family Day Care, Centre Based Day Care and Outside School Hours Care services only, as In Home Care Services are out of scope. Excludes services without an overall quality rating. Based on matched ACECQA and DESE data using DESE service details including whether for-profit. This does not necessarily match the ACECQA classification.

Source: ACECQA Q4 2019 and DESE administrative data

Further analysis indicates that there is a concentration of the highest quality services in the major urban areas relative to regional locations and, in particular, remote and very remote areas. While there is some variation in the pattern of fees by the quality rating of services, this varies by sector and by service type. It is most marked for not-for-profit Centre Based Day Care services where the average hourly fee charged by services rated as Excellent or Exceeding, of $10.48, is well above the $9.69 charged by the much smaller group of services rated as Working Towards.

These variations in the quality rating of services are, in turn, reflected in the quality of the service received by different children. Table 8 details the distribution of children, grouped on the basis of parental income, by the rating of the service they attend. It clearly shows a strong association between children from higher income families attending higher quality services. For example, well over 30 per cent of children of parents in the upper 2 income bands attend services rated as Exceeding the standard, and just 20 per cent attend services rated as Working Towards'. In contrast only some 20 per cent of those children whose parents earn under $50,000 attend these higher ranked services, and well over a quarter attend those falling below the standard.

Notes: Family Day Care, Centre Based Day Care and Outside School Hours Care services only as In Home Care Services are out of scope. Excludes services without an overall quality rating. Based on first service attended by child in the quarter.

Source: ACECQA Q4 2019 and DESE administrative data

The extent of this relationship varies by type of care, with there being relatively little relationship between family income and the rating of the Outside School Hours Care the child attends, but a much steeper gradient for Centre Based Day Care services.

While providing some insight into the nature of child care provision, these quality ratings, however, are of limited value in assessing the impact of the Package on the quality of care because, in most cases, the rating of the service was undertaken prior to the introduction of the Package.²⁹

2.2.2 Characteristics of users - children

As detailed earlier, 1,327,238 children attended child care services in Q4 2019. Over the quarter, 92.4 per cent of children attended a single service, 7.2 per cent 2 services, with the remainder attending more than 2. Such multiple use, as well as reflecting a specific pattern of use chosen by parents, includes children who may have changed the service that they attended at some point over the quarter or, for example, used one service during school vacations and another in school terms. In any one week only some 2.5 per cent are reported as attending multiple services, with virtually all of these only attending 2 services.

Child care attendance over time, as shown in Figure 5, displays a number of patterns, within and across sectors. In the case of Centre Based Day Care there is a pattern of increasing attendance over the year, as well as steep reductions in use over the Christmas/New Year period. The upward slope over the year reflects the way in which families may have a need for, or take a decision to use, child care over the year, but then for whole cohorts of children to be withdrawn in the new year, when they enter formal schooling. The sector also shows an increase in the number of children using care in each of the 3 years.³⁰ The Outside School Hours Care sector's pattern of use reflects the impacts of school terms, and lesser levels of vacation care. The number of children attending Family Day Care services shows a marked decline over the period. In part, this is associated with enforcement action, which will be discussed further in Chapter 9. While only a very small number of children use In Home Care services, notable in this data was a sharp fall from some 3,000-3,500 children using this type of care up to July 2018, to around 1,800 after that date, reflecting the tightened eligibility criteria for the new program.

Figure 5: Children attending child care services, by week and service type, January 2017 to December 2019

Notes: This is the raw count of all children identified in the administrative dataset as of each week. Children who attend different service types in the same week are counted under each service type they attend.

Source: DESE administrative data

The pattern of children's participation by age is shown in Figure 6. This records the number of children in child care at a particular age as a proportion of the estimated Australian population of this age. This ratio reaches a peak for the 3-year-old age group where 62.2 per cent of all children of this age were estimated to have attended a child care service in Q4 2019. While participation remains high, at 59.6 per cent, for those aged 4 years, it then declines relatively rapidly.

By age group it is estimated that 45.6 per cent of children aged under 5 years attended child care in Q4 2019, along with 30.6 per cent of those aged 5-9 years and 9.2 per cent of those aged 10-13 years.

Also distinct in the chart are the differing roles of the care sectors. Most of the care in the youngest age group is provided by Centre Based Day Care services, along with some contribution by the Family Day Care sector, with the Outside School Hours Care sector, commencing for those children aged 5 years, then being the major provider. The In Home Care sector only makes a very minor contribution across the period sitting at some 0.07-0.08 per cent of the population of children between the ages of one and 5 years, and then declining to 0.01 per cent for those aged 13 years.

Figure 6: Estimated rate of child care use, by child age and service type, Q4 2019

Notes: As children may attend more than one form of care the components will add up to greater than the total. Population data are June 2019 estimates.

Source: DESE administrative data; ABS 3101.0 National, state and territory population, March 2020

In Q4 2019, 3.5 per cent of children attending child care services are identified as being a child of an Indigenous family³¹ and 3.6 per cent as coming from a family where one or both parents speak a language other than English. These children are considered further in Chapter 7.

Pattern of attendance - Days per week

Overall, children attend child care services on an average of 2.83 days a week (as estimated from the number of days for which a child is charged). There is a slight tendency for this proportion to increase with age. It rises from 2.63 days for those aged under one year to 2.84 days at age 4, and then to a peak of 2.97 for those aged 13 years.

As shown in Table 9 most commonly children attend a child care service for 2 days (28.4 per cent), or 3 days (25.6 per cent) per week. Only around one in 7 children, 14.5 per cent, attend for 5 days a week, and less than 1 per cent receive child care services on 6 or 7 days, although 11.3 per cent of children in Family Day Care services report sessions on 6 days a week.

Notes: This is based on the number of days in the week in which sessions of care for the child were recorded.

Source: DESE administrative data

Pattern of attendance - Hours per session

There is also considerable variation in the length of time children attend services for when they do attend. This can be considered in 2 ways. Firstly, the length of the 'session'³² that children attend and for which parents are charged and, secondly, the actual time they spend at the service. The structure of sessions, and the extent to which these have changed with the introduction of the Child Care Package, is one of the matters considered in Chapter 5. In terms of the operation of the system, both these parameters are important, with the hourly fee and the fee cap, as well as approved hours of care, all operating on a session length basis but children's experience of child care being associated with the duration of actual attendance.

For children aged under 6 years, for those days on which they attended care, the derived average daily charged session length was 10.2 hours, which children attended for 7.1 hours. For those aged 6 years and over the session length was 4.3 hours, and children attended for 2.7 hours, see Table 10.

Notes: Data available for this part of the evaluation contained the number of hours charged per week, the number of hours they attended the service (based on their drop off/pick up times) and the number of days on which session were recorded. Session length and average period attended were derived from this. More detailed analysis of session length is in Chapter 5.

Source: DESE administrative data.

The distribution of time spent as detailed in Table 11 shows the distribution of the average time children spent in care on those days they received care over Q4 2019. Children who attended Centre Based Day Care most frequently attended for between 6 and 8 hours (35.6 per cent) or between 8 and 10 hours (38.9 per cent). In contrast, those attending an Outside School Hours Care service most frequently spent less than 2 hours at the service, although a proportion of periods of attendance of 8 to 10 hours were also recorded. This latter reflects the role of this sector in providing whole day care over school vacations.

Notes: Distribution of weekly average period attended on days attended.

Source: DESE administrative data

Cost of services

Across all services the cost of an average hour of care (excluding In Home Care where the cost is per family) and based on the formal session period was $9.78. This varied between services, service types, and locations. The detailed distribution of fees, and the implication of these for affordability, is addressed in Chapter 4. The distribution by service type and location is shown in Table 12. Across all non-In Home Care services, and locations, the average cost of care in services provided by not-for-profit providers was $9.30 per hour, and by for-profit providers $10.05. This though also reflects the mix of services by state, location, and service type. In the Centre Based Day Care sector, for example, there was little difference between the average not-for-profit fees of $10.24 compared with $10.37 in the for-profit sector. This was also the case in the Family Day Care sector where the average hourly rate charged by a not-for-profit provider of $10.69 was the same as that charged on average by for-profit providers.

As illustrated, there were some marked differences between states, with particularly high costs in the Australian Capital Territory, followed by Western Australia and Victoria.

Notes: ^a Excludes In Home Care.

Source: DESE administrative data

The more detailed analysis in Chapter 4 indicates that not only do 14.3 per cent of services have an average above the cap, but just the minority, 44.1 per cent, do not record having charged care for a child at a rate above the cap, at some point in Q4 2019.

2.2.3 Structure of users - families

In Q4 2019, 933,648 families³³ had children who attended child care services. Of these families, 63.1 per cent had a single child who attended a service in the quarter, 31.8 per cent had 2 children attending child care, 4.5 per cent 3 children and the remaining 0.6 per cent more than this.

The administrative data for Q4 2019 indicates that 78.9 per cent of the families with children attending child care were couple families, and 21.1 per cent single parents. The number of children attending child care per family in single parent families was typically smaller than in couple families, with 68.3 per cent of single parents having just one child in child care, compared with 61.7 per cent of couple families.

While there are some differences in the number of children attending child care services for families in different circumstances, in most cases the differences are slight, although, overall, families with higher incomes tend to have more children attending relative to those on middle and lower incomes. There was little variation by region.

Engagement with the child care system by parents tends to be persistent. Of those parents who commenced using child care before or during 2017, 69.1 per cent were still using child care in 2019, and of those who commenced in 2018, 82.8 per cent were using it in 2019.

Families by activity

Table 13 shows the distribution of families by state and classified by their level of participation in employment and other activities, based on their reported activity in the context of the CCS activity test.³⁴ As illustrated, most families using child care engage in significant levels of activity. In Q4 2019, of the single parent families, 40.1 per cent report being engaged on a part-time basis (activity of between 10 and 34 hours per week), and 41.4 per cent on a full-time basis (35 hours or more of reported activity per week). Among couple families, the most frequently reported forms of engagement are: 46.7 per cent of couples report one person with part-time activities and one with full-time; and 35.9 per cent where both parents report activity of more than 35 hours per week.

This data also highlights some marked differences between states. While on average, across states, the proportion of single parents reporting part-time and full-time activity are similar, in the Northern Territory a much higher proportion of this group report being engaged at the full-time level. Similarly, there is considerable difference between states in the level of activity reported by couples. For example, while across Australia there are some 77 couples where both undertake full-time activity for every 100 who have one member with part-time activity and one with full-time activity, this proportion varies from just 46:100 in Tasmania to 101:100 in the ACT and 172:100 in the Northern Territory.

Notes: Data relates to a range of approved activities, one of which is employment, and also includes journey to work and related travel time. Data is reported on a fortnightly basis and has been converted to a weekly basis assuming equal time was spent in each week. ^a Low includes zero and less than 10 hours per week; Part-time is 10 to under 34 hours per week, Full-time is 35 hours or more a week. ^b There are a number of reasons why activity may be missing. One, discussed in Section 2.3, is that there are some families who do not apply for subsidies. Second, there may be non-reporting by families' who have an exemption from the activity test. It should also be noted that this group may be over-reported as being single parents, as without full reporting, associated with activity, a partner may not be identified.

Source: DESE administrative data

Family income

The distribution of families using child care, and children in care in Q4 2019, by whether they are a single parent family, or a couple, by gross household income, is shown in Table 14. Dominant in the table is the concentration of single parents at the lower end of the income distribution, with both 56.3 per cent of these families and children in these families attending child care reporting incomes under $50,000 per annum³⁵ compared to just 5.0 per cent of couple families. In contrast, 46.5 per cent of couple families, and 48.4 per cent of the children of such families who attend child care, report incomes of $150,000 or more.

Notes: ^a Estimated gross income as reported.

Source: DESE administrative data

Further analysis of family income of families using child care, including the distribution of income with regard to the steps of the CCS subsidy rate, is presented in Chapter 4.

Data from the DESE/ORIMA parent survey suggests that, on balance, among families with children those who used child care were less sanguine about their financial situation than those who did not. The distribution of responses to the question 'Given your current needs and financial responsibilities, would you say that you and your family are …?' are shown in Figure 7. While there is clearly a skew towards more negative responses by those using child care, only the differences in the categories 'Very comfortable', and 'Just getting by', were statistically significant.

Figure 7: Families with children aged under 13, perception of financial circumstances, by use of child care, DESE/ORIMA parent survey, June 2019

Notes: Child care user defined as a parent who has a reference child in an identified formal child care reference care. (See Section 2.4.2). Error bars on the chart show the 95 per cent confidence interval on the estimate.

Source: DESE/ORIMA Parent survey, June 2019

2.3 Costs and subsidies

The cost of child care is considered in detail in Chapter 4. This section considers the notional distribution of costs over time and the aggregate budget impact.

2.3.1 Fees and subsidies over time

The level of weekly fees charged and notional subsidies paid shows a number of patterns over time (Figure 8).³⁶ These are driven by the patterns of use of child care services, the level of fees, and the structure of assistance to parents. Overall, the pattern of total fees reflects the number of children receiving care, as seen in Figure 5. The pattern of subsidies, however, also shows 2 distinct features relating to the old and new subsidy systems:

• In the period up to July 2018, there is a distinct pattern of the level of subsidies declining over the financial year. This reflects, in large part, the impact of the CCR cap. This progressively cut in across the financial year as more people reached their cap and lost eligibility for further assistance.
• In the post July 2018 period, the subsidy shows a distinct sawtooth pattern. This is largely a product of the caps on the number of hours of care a family is entitled to in a fortnight, with a small number of families reaching this cap in the second week of each of the assessable fortnights and hence receiving a lesser amount than they did the previous week. The operation of the activity test is considered in Chapter 6.

Figure 8: Total weekly fees and notional fee relief subsidies, January 2017 to December 2019

Source: DESE administrative data

More detailed analysis of the impact of subsidies on the affordability of child care is undertaken in Chapter 4.

Non-receipt of subsidies

While most children in child care do receive subsidy support, a small proportion, estimated at 5.6 per cent of children, do not. There are a number of reasons for this. In some cases, a parent will not meet the residency criteria for eligibility for subsidy or provide less than the 14 per cent minimum level of care, they may fail to meet immunisation requirements, or the family may have an income above the cut-off for CCS eligibility, or consider that the amount of subsidy due to them is not worth the effort of applying for the subsidy, or parents may simply be reluctant to register with Centrelink. In the case of administrative data, such as that used here for analysis, it is also possible that a single snapshot of data may record some incomplete administrative processes.

The incidence of non-receipt is highest in Outside School Hours Care where 10.7 per cent of children who attended such services, and had fees paid for, did not record having received a subsidy. In contrast, the proportion was just 0.6 per cent for children in In Home Care,³⁷ 2.2 per cent for those in Family Day Care, and 3.2 per cent for those in Centre Based Day Care. Across the population of children, the incidence of non-receipt is concentrated in higher income families, or those with missing information on income.

Figure 9: Proportion of children not receiving subsidy, Q4 2019

Note: Children for whom no subsidy is recorded in the quarter although they have recorded fees charged.

Source: DESE administrative data

2.3.2 Government expenditure

Budget expenditure by the Department of Education, Skills and Employment on child care programs is shown in Table 15. More generally, the Productivity Commission reports an increase in real spending by the Australian Government on ECEC of 74.8 per cent, from $4.498 billion in 2009-10 to $7.861 billion in 2018-19. The Productivity Commission also reports, in addition, spending of $1.964 billion in 2018-19 by state and territory governments.

As shown in Table 15, the overwhelming proportion of expenditure by the portfolio is on the subsidy programs. The support programs primarily involve spending on the Inclusion Support Program and the Community Child Care Fund, which are discussed in Chapters 7 and 9, but prior to 2018-19 also included expenditure on the Budget Based Funded Services.

Drawing strong conclusions from this budget information is, however, limited by some outstanding issues with the accrual accounting estimates for 2018-19. Over the financial year 2018-19, the Departmental administrative data reports the total value of the (unreconciled) Child Care Subsidy at $7.69 billion. While data for the 2019-20 financial year is included in the table, it is noted that this estimate also includes the impact of policies implemented as a response to COVID and hence is not a reflection of the impact of the Package on program expenditure.

Notes: ^a Selected program elements, excludes items such as communications campaigns and contributions to the Early Years Quality Fund. ^b DESE reports that in addition to this estimate of their actual expenses on an accrual accounting basis, the Department has also contingent assets and liabilities which relate to reconciliation and related debt issues.

Source: 2015-16: Education and Training Portfolio, Portfolio Additional Estimates Statements (PAES) 2016-17, 30-31; 2016-17: Education and Training Portfolio, PAES 2017-18, 25-26; 2017-18: Education and Training Portfolio, PAES 2018-19, 29; 2018-19 & 2019-20: Education, Skills and Employment Portfolio, PAES 2019-20, 37

2.4 Satisfaction with child care

Parental attitudes to the role and use of child care are important both in determining levels of use of these services and with respect to their satisfaction with access, quality and cost. The specific aspects of parental experiences and satisfaction with affordability will be considered in Chapter 4, those relating to flexibility in Chapter 5, and access in Chapter 6. This section considers, firstly, the attitudes of parents who both use and do not use child care services towards the role of this sector, and, secondly, what parents who use these services consider to be important, and their levels of satisfaction with aspects of provision.

The data used here has been drawn from a series of parent surveys undertaken by ORIMA Research for the Department of Education, Skills and Employment and made available to the evaluation as the key data source on parental experiences and attitudes. The survey is detailed further in Appendix A and will be drawn on in other chapters where it offers particular insight into the questions being considered. The June 2018, November 2018 and June 2019 surveys included a sample of parents using and not using child care. The November 2019 survey only sampled parents using care.

Most of the data on satisfaction and attitudes was collected on a 5-point scale, with parents rating their agreement or otherwise with a series of statements, with responses ranging from 'Strongly disagree' to 'Strongly agree'. In the following analysis, some results are presented as the original distribution, in other cases, a single summated score has been derived, with the mean, average, score being shown. This score ranges from -2 if everybody strongly disagreed with a statement to +2 if everyone strongly agreed.

2.4.1 Parental attitudes to child care

Parents were surveyed with regard to their attitudes to work and child care, including the benefits they saw children could obtain from participation. The questions sought parents' level of agreement with statements that child care benefits children in terms of their social skills, and benefits their learning and development. The results, as average scores, are presented in Figure 10. The data is presented for 2 different parental classifications, one by family type and labour force participation, the second by family type, age of youngest child and whether or not the respondent used child care.

Figure 10: Parental views on the benefits of child care for children, mean agreement, June 2019

Notes: These questions asked a respondent parent to state their level of agreement with a series of statements. The charts show the mean score on a 5-point scale centred on those who neither agree nor disagree. The weights attached were 'Strongly disagree': -2; 'Disagree': -1; 'Neither agree nor disagree': 0; 'Agree': +1; and 'Strongly agree': +2. Error bars on the chart show the 95 per cent confidence interval on the estimate. ^a The labour force status of families has been derived from the reported employment activity of respondents and their partners and data on hours of work. SP F/T: Single Parent full-time employed; SP P/T: Single Parent part-time employed; SP Nil: Single Parent not employed; Cpl 2 F/T: Couple, both full-time employed; Cpl F/T & P/T: Couple, 1 full-time and 1 part-time employed; Cpl 1 F/T: Couple, 1 full-time employed and other not employed; Cpl P/T only: Couple, no full-time but one or both part-time employed; Cpl Nil: Couple, neither employed; ^b SP use 0-4: Single parent uses child care, youngest child aged 0-4 years; SP use 5-13: Single parent uses child care, youngest child aged 5-13; SP non 0-4: Single parent does not use child care, youngest child aged 0-4; SP non 5-13: Single parent does not use child care, youngest child aged 5-13; Cpl use 0-4: Couple uses child care, youngest child aged 0-4; Cpl use 5-13: Couple uses child care, youngest child aged 5-13; Cpl non 0-4: Couple does not use child care, youngest child aged 0-4; Cpl non 5-13: Couple does not use child care, youngest child aged 5-13.

Source: DESE/ORIMA Parent Survey June 2019

The data using this second classification, in particular, highlights some very large differences in the attitudes of parents. Although all groups reported on balance a positive level of agreement with the statements concerning child care having benefits for children, the force of this agreement was markedly, and statistically significantly, higher for each of the groups of parents who used child care, relative to the equivalent group of parents who did not use care.

Although the differences on the basis of labour force participation were not as marked, a key difference was seen among couples where both parents were working, especially working full-time, relative to those couples where there was a single full-time breadwinner. This latter group of respondents reported much, and statistically significantly, lower levels of agreement.

This result has a bearing on considerations in Chapter 8 on employment participation.

2.4.2 Parental satisfaction with child care

Parents were also asked questions about their overall level of satisfaction with the quality of paid child care. The first question asked about all paid child care that they had used over a defined reference period. The second was focused on a specific child care service received by a specific child in their family - the 'reference care' accessed by a 'reference child'.³⁸ This latter is the focus of consideration here.³⁹  Figure 11 presents the distribution of responses to this question across the 4 waves of the survey.

Satisfaction with the quality of care

Overall, parents expressed satisfaction with the child care their child was attending, with around half stating they were 'satisfied' and a bit over a third saying they were 'very satisfied', around 8 per cent said they were 'neither satisfied nor dissatisfied', some 4 per cent said they were 'dissatisfied', and around 1 per cent that they were 'very dissatisfied'. In general, there was little change in these responses over the 4 surveys, other than in November 2019. The proportion of parents reporting that they were very satisfied with the quality of care in this survey, of 32.3 per cent was statistically significantly lower than the 37.9 per cent recorded in June 2019 and 36.7 per cent in June 2018. Conversely, there was a statistically significant increase in the proportion reporting that they were satisfied between June 2019 and November 2019, but not relative to June 2018.⁴⁰

Figure 11: Distribution of parental satisfaction with quality care, June 2018 to November 2019

Notes: Reference care of reference child. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, June 2018, November 2018, June 2019 and November 2019

The pattern of stability seen in this distribution is also seen when the responses are combined into a single scale. This identified a small fall from June 2018 to November 2018 and then an increase to June 2019, and a decline to November 2019. However, none of the movements, either between individual surveys, or overall, were statistically significant at the 95 per cent confidence level, although the June to November 2019 fall was significant at the 90 per cent level. Figure 12 shows this single scale measure disaggregated by the type of care which was identified as the reference care.

While the results for the In Home Care sector are shown in the diagram, these will not be discussed, as the small sample size for this sector makes the estimates unreliable. Looking firstly at the relative ranking of the other sectors across the surveys, Family Day Care had a significantly higher level of satisfaction with the quality of care relative to both Outside School Hours Care and Centre Based Day Care in all surveys. In turn, Centre Based Day Care recorded statistically significant higher satisfaction with the quality of care than Outside School Hours Care in all but the November 2019 survey.

With respect to changes over time, there were no significant changes in satisfaction in any of the sectors, at the 95 per cent level of confidence and, indeed, across the sectors a range of diverse movements are recorded. Using the less stringent 90 per cent confidence measure, the decline in satisfaction with quality in Centre Based Day Care seen in November 2019 is a significant decline from that in June 2019 but not relative to June or November 2018.

Figure 12: Trends in mean satisfaction with quality of care, by sector, June 2018 to November 2019

Notes: Reference care of reference child. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, June 2018, November 2018, June 2019 and November 2019

Two snapshots of satisfaction by state and territory in June 2018 and November 2019 are shown in Figure 13. In June 2018 respondents in Western Australia reported a significantly higher level of satisfaction with the quality of care received by the reference child compared to Victoria and Queensland but with no other significant differences with other states and territories. In November 2019 the only significant difference was a higher level of satisfaction in Tasmania relative to Victoria.

Turning to change over time, between June 2018 and November 2019 all states other than NSW showed a decline in satisfaction, although none of these, nor the very slight increase in NSW, were statistically significant at the 95 per cent confidence level, although the decline in Western Australia was significant at the 90 per cent confidence level.

Figure 13: Mean satisfaction with quality of care, by state, June 2018 and November 2019

Notes: Reference care of reference child. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, June 2018 and November 2019

Importance of, and satisfaction with, aspects of care

The surveys asked parents about their level of satisfaction with a number of different aspects of child care. Specifically, parents were asked about their level of agreement with the following statements:

• Your child care service offers good learning and development opportunities for your child.
• Your child care service provides a place for your child to socialise with other children.
• Your child care service offers a healthy and safe environment for your child.
• The workers at your child care service are trained and experienced educators.
• Your child care service provides culturally appropriate care to your child.
• I am able to change my child care hours or days if I need to.

Additionally, in the baseline June 2018 survey, parents were also asked about the importance of these dimensions of child care provision, using a similar 5-point scale. Figure 14 illustrates the responses in that survey to both the question on importance and that on the level of satisfaction. The data is provided separately with respect to where the reference child is aged under 5 years, and for those aged 5-13 years.

The first 3 aspects seen as being most important were the same for both groups of children: firstly, health and safety, followed by having trained and experienced educators and, thirdly, providing opportunities for socialisation. Learning was fourth ranked with regard to care of younger children, followed by parental capacity to change hours and days, and for the older age group these 2 were reversed. While in rank terms, this reversal of position of learning is relatively minor, the mean scores show a marked difference; a mean rating of 1.2 for the younger age group and just 0.6 from parents with a reference child in the older age range. For both groups, cultural appropriateness is last ranked, with other analysis suggesting this is a very amorphous concept.

Figure 14: Parental views of importance of, and satisfaction with, aspects of child care provision, by age group of youngest child, June 2018

Notes: Satisfaction relates to reference care of reference child. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, June 2018

The trends in satisfaction against each of these dimensions, across the 4 surveys from June 2018 to November 2019, are shown in Figure 15.⁴¹ The time series for satisfaction with the first 4 aspects of satisfaction: good learning and development opportunities; socialising with other children; providing a healthy and safe environment for children; and having trained and experienced educators all show the same pattern. This is an increase in satisfaction to a peak in June 2019 to reach a level statistically significantly higher than that in June 2018, and then a decline to November 2019 leaving the measure at a level somewhat above, but not statistically significantly higher, than it was in June 2018.

Satisfaction with care being culturally appropriate shows a similar pattern but with the level in November 2019 being statistically significantly above that recorded in June 2018.

In contrast, satisfaction with their ability to change hours and days, as well as having a much lower level of satisfaction in each of the surveys when compared with any of the other dimensions of provision, shows a pattern of declining satisfaction, with the level of satisfaction in November 2019 being statistically significantly lower than it was in June 2018. This is an aspect that will be considered in Chapter 5.

Figure 15: Parental satisfaction with elements of child care provision, June 2018 to November 2019

Notes: Reference care of reference child. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, June 2018, November 2018, June 2019 and November 2019

Taken together, this would suggest that, while on balance there have been some increased satisfaction by parents with some aspects of child care provision, these have been relatively modest and not statistically significant, due in some cases to a decline at the end of the period, as well as one measure showing a decline over the period. More generally, the responses to the aggregate question on satisfaction with quality showed no significant change. While clearly pointing to there not having been any systematic decline in these aspects of care associated with the introduction of the new Child Care Package, neither does this data suggest that there has been any significant improvement.

2.4.3 Service perspective on system

There is less systematic material available on services' perspectives of the state of the sector, although the Early Learning: Everyone Benefits report summarised it as:

At a national scale, the picture presented in this report is largely positive; however, focusing on the detail reveals challenges. While the headline figures indicate strong national progress in ECEC provision and quality, closer examination highlights significant pockets of unmet need, and problems of affordability and workforce planning. The picture also differs between states and territories, where differences in the ECEC landscape combine with varying policy settings to produce inconsistent results for children and families. (Early Learning: Everyone Benefits, 2019, p. 1)

2.5 Summary

The data in this Chapter has sought to describe the structure and magnitude of the child care sector in Australia and some of the main characteristics of the services that provide care and the families and children who use them. It has identified a number of specific aspects of the system, which will be addressed in later chapters.

While there has been a trend to improving quality in child care services as measured by ratings under the National Quality Standards, this data does not provide a basis for examining changes related to the impact of the Child Care Package.

The Chapter also reports on parental satisfaction with the child care system. This indicates:

• Overall, parents have a relatively high level of satisfaction with the quality of the child care that their children receive, with a distribution of views on what is important in the services provided by the sector.
• While satisfaction with some particular aspects of care have shown some improvements between some of the surveys, these have not necessarily been consistent over time, or with each other. More generally, there has been no significant change in parental satisfaction with the overall quality of care provided by child care services since June 2018. This suggests, at a minimum, that there have been no adverse impacts in these areas associated with the changes introduced with the Child Care Package in July 2018 but, equally, no evidence of any positive effects.

3. Simplicity

The second program outcome identified for the evaluation was that 'Access to child care support is simple for families and services'. This is addressed in this chapter. The role of the Package in delivering a simpler system was emphasised in the second reading speeches on the legislation: 'A new, simpler Child Care Subsidy, which will improve affordability' (Birmingham, 2017) and 'a simpler, more affordable, more accessible and more flexible early education and childcare system' (Porter, 2016).

3.1 Program changes and simplicity

3.1.1 Program changes

A number of elements of the Package can be seen as making the child care system simpler. These included:

• The replacement of the dual subsidy approach of Child Care Benefit and Child Care Rebate with the single Child Care Subsidy.
• Improved processes for services in relation to regulations around approvals and opening hours. This included improving the consistency of language and streamlining required processes.
• A new IT system. The Department indicated this would 'support the major changes to the Child Care Package and will positively impact child care services, families and all levels of government with streamlined processes, reduced administrative and regulatory burden and increased information sharing' (Department of Education and Training, 2017a, p. 2).

At the same time, the new program arrangements introduced new, and modified other, elements of the program including: the new Income and Activity Tests, along with new processes for accessing child care assistance and enrolment processes, new reporting requirements and the hourly rate cap. These all have implications for the operation of child care for both parents and services. The Department considered that the new IT system would 'reduce regulatory burden on service providers by allowing parents to electronically record the times their child attends a child care service … [and] would remove the need for services to undertake administrative tasks, such as preparing and storing attendance sheets, … [and] would also streamline the reporting processes for services' (Department of Education and Training, 2015a, p. 101). While aspects of the enrolment and reporting process were seen as improving compliance and were 'required to support the integrity of the child care system, … [a]ll providers will be required to invoice families fortnightly, rather than quarterly, to provide families with information about their usage and entitlements' (p. 103).

In late 2019 the government revised one aspect of the new policy, changing what was known as the '8-week rule'. Under this, enrolments were deemed to lapse after 8 weeks of absence and required a new application for any further assistance. The change extended this period to 14 weeks. This addressed a concern by services that the 8-week period was too short, especially for the Outside School Hours Care sector, and had created a more complex and less efficient framework for the program. Because of the timing of data collections for the evaluation, most of the information used here predated this change and hence its impact cannot be reported on, and responses reported on may reflect this earlier issue.

3.1.2 Evaluating simplicity

Evaluating simplicity has a number of challenges, some of which have been exacerbated by the curtailment of some planned evaluation activities as a consequence of the pandemic, and the changed timing of this final report. These challenges include:

• The nature of the evaluation, which is focused on outputs and impacts, rather than being a formative evaluation. As such, it has not incorporated the type of systems analysis that would more directly inform on the complexity of processes. In the absence of this type of analysis and, as previewed in the evaluation strategy, a strong reliance on perceptions of simplicity, rather than direct measurement of this.
• The extent to which simplicity can be intermediated by the actions of the parties. For example, parental assessment of simplicity may be influenced by the extent to which services provide support to parents in their interactions with the child care system. Similarly for services, the quality of the software they use (as provided by a third party), significantly shapes their experience of the complexity of their interactions.
• The degree to which perceptions of simplicity are impacted on by 'difference' rather than 'complexity'. That is, people learn systems, and the introduction of a new system involves a new learning process, which means that, even if the new arrangement is simpler, they are less familiar. In this context, responses collected by the evaluation on 'simplicity' may be impacted by the experience of doing something different.
  • Similarly, over time, as people become habituated to a system and learn how to navigate its complexities, they can confuse their increasing facility in working with it as simplicity.
• The introduction of the Package involved very substantial change and, in many cases, a very high workload, in particular for services, in making preparations and adjustments to their operations for the new system. Differentiating these transition effects relative to ongoing simplicity is difficult, especially where there is a high reliance upon subjective reporting.

The relationship between simplicity, and knowledge, and understanding, is also important. Some simple processes can appear, or become, complex if people cannot obtain, or understand, information about them, and even quite complex processes can be relatively simple to complete if people are readily able to access and understand clear information and guidance. For this reason, questions about access to, and understanding of, information about the system and its processes are also considered here.

In evaluating simplicity, 2 other key issues are:

• Whether or not the focus is on an absolute or a relative concept of simplicity. The evaluation largely considers this in relative terms - are the arrangements introduced with the Package simpler than what existed before, and how does the complexity of the operation of the Package compare with other administrative arrangements?
• How to treat problems experienced with processes; for example, slow administrative processes, systems issues, and other factors that impinge on the efficiency of the system, in the context of simplicity. In this chapter, we have included some dimensions of this. Underlying this approach is that a system that is conceptually simple but operationally inefficient, does not meet common concepts of simplicity in public administration.

The experiences of simplicity for families and services are also relevant to other outcomes and impacts in this report. For families who find access to child care assistance complex, or do not understand application processes, this may impact on both access to, and affordability of, child care. For more vulnerable families, this may be especially relevant, and is discussed in Chapter 7. For services, concerns about more complex or administratively burdensome processes may contribute to concerns about viability.

This Chapter initially considers parents' perceptions of whether the new subsidy arrangements are easier to understand, along with their level of understanding of the system, how easy they find information on child care to understand, as well as the sources they use to access this. A similar approach is then taken with services.

3.2 Parental perceptions and experience of the Child Care Subsidy

In addressing the question of simplicity from the perspective of parents a focus is their ease of understanding and ability to successfully operate within the system.

3.2.1 Overall assessment of the child care subsidy

The November 2018 and June 2019 DESE/ORIMA parent surveys asked parents a broad overview question about their level of agreement with a statement: 'The new child care subsidy is easier to understand than the old Child Care Benefit and Child Care Rebate.'

This question elicited a consistent pattern of responses in both the November 2018 and June 2019 surveys. That is, the perception of the relative ease of understanding the Child Support Subsidy system compared to the old was viewed consistently shortly after its introduction and a year after. This pattern suggests that the responses reflect a measured assessment, rather than being unduly influenced by familiarity or difference. As shown in Figure 16, the most common response was that people neither agreed nor disagreed with the statement, with just over 43 per cent of respondents giving this answer in both surveys. Some 33-34 per cent reported a degree of agreement with the statement, and 22-24 per cent disagreement. In both these cases - and more so in the case of agreement - these were heavily weighted towards the more moderate response of 'agreement', rather than 'strong agreement'.

Figure 16: Parental agreement 'The new child care subsidy is easier to understand than the old Child Care Benefit and Child Care Rebate', DESE/ORIMA parent survey, November 2018 and June 2019

Notes: Parents with a 'reference child' in an identifiable 'reference care'. Error bars on the chart show the 95 per cent confidence interval on the estimate.

Source: DESE/ORIMA Parent Survey November 2018 and June 2019

More detailed analysis of these responses found some variation in responses for different population subgroups. Most marked, as seen in Figure 17, were variations between families on the basis of family income. While lower and middle income families tended towards being neutral or weakly positive, higher income families were negative in their assessment of the ease of understanding of the new policies. However, the 2 groups with strong negative responses represent very small population groups - 3.3 per cent and 1.4 per cent, respectively.

The largest population group - those families with children in child care with gross family incomes between $65,000 and $125,000 per annum, who accounted for around 30 per cent of the estimated population of parents in November 2018, was the only group that recorded a statistically significant average positive rating in both November 2018 and June 2019 in response to this question on the CCS being easier to understand, although those families with an income of between $30,000 and $65,000 also did so in the June 2019 survey but not in the preceding November survey. While the 2 lower income groups both reported an increase in their assessment of the relative ease of understanding the program between these 2 waves of the survey, the reverse was the case for all other groups, although none of these changes were statistically significant.

The pattern of responses, in particular the more adverse responses by higher income groups, would appear to reflect several factors. One is the extent to which families with higher incomes were more likely to have a decrease in their level of subsidy rather than any increase, and the structure of the new administrative arrangements that required them to engage with Centrelink, that many of those with lower incomes had already had some experience with.

While there were some other statistically significant variations, these were not consistent across the surveys and were small in magnitude.⁴²

Figure 17: Mean parental agreement 'The new child care subsidy is easier to understand than the old Child Care Benefit and Child Care Rebate', by family income group DESE/ORIMA parent survey, November 2018 and June 2019

Notes: Parents with a 'reference child' in an identifiable 'reference care'. The chart shows the mean score on a 5-point scale centred on those who neither agree nor disagree. The weights attached were 'Strongly disagree': -2; 'Disagree': -1; 'Neither agree nor disagree': 0; 'Agree': +1; and 'Strongly agree': +2. Error bars on the chart show the 95 per cent confidence interval on the estimate.

Source: DESE/ORIMA Parent Survey, November 2018 and June 2019

Overall, this would suggest that while the Package measures were, on balance, seen more positively than negatively in terms of parents' ease of understanding, the magnitude of this was small. The average rating in November 2018 was 0.08, just one twelfth of a response category above neutral and, in June 2019, 0.11 of a category.⁴³ While both of these were statistically significantly different to being neutral, the strength of agreement was very weak. While responses to this question varied across population subgroups; in general, these were small, other than the more negative response by those on higher incomes. Overall, these results suggest a very small marginal effect, rather than any significant shift in perceptions around the simplicity of child care support.

3.2.2 Parents and the Child Care Subsidy

Parents' assessment of their understanding

Parents were asked (in CCPFamS) how well they understand how eligibility for CCS works. In November 2018, 31.8 per cent said they understood this 'very well' or 'well'. Another 42.2 per cent reported they understood it 'somewhat', while 25.9 per cent said they understood this 'not very much' or 'not at all'. When this same question was asked in September 2019, responses were similar, although with a little more understanding reported: 35.2 per cent said they understood how eligibility to CCS works 'very well' or 'well'.

Figure 18 presents, for this question, and a number of more specific questions about the operation of the subsidy, the mean score reported by parents in these 2 survey waves. A positive score represents a balance of responses above that of 'somewhat understanding' and a negative score a balance below this - that is somewhere between 'somewhat' and 'not very much'.

The chart indicates that there was some variation in parents' understanding of different aspects of the program, and some shift in the level of understanding over time:

• Overall, the average scores reported by parents were just slightly above 'somewhat of an understanding'.
  • The most well-understood component was what parents needed to do if their circumstances changed, and the least well-understood was the 5 per cent withholding.
• Over time, between November 2018 and September 2019, there was some improvement in understanding by parents, as reported in this survey.
  • This was relatively slight in the case of understanding how eligibility for the Child Care Subsidy works, and how income and activity affects entitlement. In each of these, the gain was just one tenth of a step between response categories.
  • In contrast, understanding of what to do if circumstances change, and of the 5 per cent withholding, increased by around 0.4-0.5 of a step.

Figure 18: Parents' self-reported understanding of aspects of the Child Care Subsidy, CCPFamS, November 2018 and September 2019

Notes: The chart shows the mean score on a 5-point scale centred on those who report they 'somewhat understand'. The weights attached were 'Not at all': -2; 'Not very much': -1; 'Somewhat': 0; 'Well': +1; and 'Very Well': +2.

Source: Child Care Package Family Survey, Wave 1 (November 2018) and Wave 2 (September 2019)

Multivariate analysis of these responses did not identify any strong patterns of association other than those who reported they or their partner worked variable hours, reporting a lower degree of understanding to most of the questions. This was a marked half a category difference with respect to eligibility, and a third of a category on the role income plays in determining entitlement.

Parents' experience of the CCS

A series of more experiential questions relating to the ease of interaction with the Child Care Subsidy were asked in the DESE/ORIMA parent survey. While some of these questions were asked in each wave of the survey, and provide some basis for identifying the extent to which the Package was relatively simpler than previous funding arrangements, others were only asked of the new arrangements. The results are shown as summary mean ratings in Figure 19. Again, these are rated with agreement being positive on a 2-step scale and disagreement negatively, with neutrality being neither agreement nor disagreement.

As shown, the largest negative response was with regard to it being 'easy to understand government information about child care fee assistance'. This series, though, does show a statistically significant improvement between June 2018, when the question related to the old funding arrangements, and the subsequent surveys, which relate to the Child Care Subsidy. The pattern of these responses is considered further in Figure 20, which shows the proportion of parents 'strongly disagreeing' with the statement falling from 20.9 per cent to 15.8 per cent between June 2018 and November 2019, and the proportion 'agreeing' increasing from 21.5 per cent to 26.2 per cent, with both these movements being statistically significant. In addition, there was a fall in those 'disagreeing' and a slight increase in those 'strongly agreeing', but neither of these was statistically significant.

While suggesting that information on the Child Care Subsidy was more easily understood (or presented), the actual magnitude of change needs to be given some attention. This change equates to a fall of 7.3 percentage points in the proportion of parents who disagreed with the statement, and an increase of 5.2 percentage points in the proportion agreeing. More so, even after this improvement, some 49.8 per cent of parents disagreed with the statement and just 28.7 per cent agree.

Additionally, while there has been a small improvement in understanding, it has not been accompanied by any consistent increase in parents' perception of the ease with which they can obtain this information.

Figure 19: Mean parental agreement with statements on aspects of the operation of the Child Care Subsidy, DESE/ORIMA parent survey, June 2018 to November 2019

Notes: Parents with a 'reference child' in an identifiable 'reference care'. The chart shows the mean score on a 5-point scale centred on those who neither agree nor disagree. The weights attached were 'Strongly disagree': -2; 'Disagree': -1; 'Neither agree nor disagree': 0; 'Agree': +1; and 'Strongly agree': +2. Error bars on the chart show the 95 per cent confidence interval on the estimate.

Source: DESE/ORIMA Parent Survey, November 2018 and June 2019

Figure 20: Parental agreement that 'It is easy to understand Government information about child care assistance', DESE/ORIMA parent survey, June 2018 and November 2019

Notes: Parents with a 'reference child' in an identifiable 'reference care'. Error bars on the chart show the 95 per cent confidence interval on the estimate.

Source: DESE/ORIMA Parent Survey, November 2018 and June 2019

The only other question that recorded a consistent significant change over time was that concerning information on service quality: 'It is easy to access information on the quality of child care.' There does not seem to be any activity associated with the Package that could impact on this change, which was seen across the country.

Turning to the other questions, it is noted that:

• The balance of responses to questions about the ease of being able to 'provide (or update) my details for child care assistance via the myGov website or Centrelink'⁴⁴ and it being 'easy for me to report fortnightly hours of activity for the Child Care Subsidy Activity Test', were positive, although this was only weakly so. On average, the responses to these questions were just a little above one third of the way to 'agreement', relative to 'neither agreeing or disagreeing', with fewer than one in 10 respondents strongly agreeing.
  • There was no time trend in these responses, which suggests that lack of familiarity with the system in the early stages of introduction was not a factor in the relatively low scores.
  • Parents reported (CCPFamS (Wave 2)), in September 2019, a considerable degree of confidence that they had reported their activity details correctly (85.4 per cent agreed or strongly agreed). However, about half (50.6 per cent) the parents reported being worried that they would end up with a child care debt at reconciliation if they did not get their activity details right. The majority indicated they did not overestimate or underestimate their activity hours, in contrast to the minority reporting to overestimate (6.6 per cent), or underestimate (11.5 per cent), the hours of activity they report to Centrelink. Overall, these responses indicate that while the majority of parents make an effort to record their activity details correctly and in a timely manner, many are still concerned about having a child care debt associated with incorrect reporting of activities (referred to as 'activity debt' by the Department).⁴⁵
  • There was a weakly significant negative association between parents who had variable hours of employment and their reporting of ease of completing these various administrative tasks. There was also a tendency for higher income families to be more negative.
• Statements [Statements of Entitlement]⁴⁶ provided by services were seen most positively of any of the aspects covered by these questions.

3.2.3 How parents gain information

To access information about child care assistance, families may go online for general information, with information provided on Services Australia and Department of Education, Skills and Employment websites, as well as being available from different child care providers and stakeholders. They may also contact Centrelink by phone or in person. Where parents go to for information about government child care fee assistance, as reported in the November 2019 ORIMA/DESE survey, indicates that by far the most common information source among those using paid child care, see Table 16, was Centrelink/myGov, with three-quarters of respondents citing this as one of the sources they used.

Notes: Parents with children attending paid child care.

Source: DESE/ORIMA Parent survey, November 2019

Centrelink/myGov as an information source was reported by a similar percentage in June 2019 (77.0 per cent) but before this, in May 2018 and November 2018, was reported by much lower proportion (50.8 per cent and 43.4 per cent respectively). In contrast, the percentage of families reporting that they sourced information from their child care service was lower in June 2019 (27.6 per cent) and November 2019 (24.1 per cent) compared to a much higher 49.9 per cent previously in November 2018. ('Child care service' was not a response category in the May 2018 survey.) The changing information sources appear to indicate a pattern of strong reliance upon services during the transition and then a shift toward Centrelink/myGov.

3.2.4 Parental reports of issues arising

This section draws on some of the qualitative data collected in the evaluation through surveys, consultations and case studies to identify some of the more recurrent themes in parental and provider responses concerning issues that have arisen in parents' interaction with the child care system.

The activity test

The activity test was frequently raised. This test is both simple in some aspects and complex in others,⁴⁷ and while at times appearing to be applied as 'indicative' rather than prescriptive, parents' statements of activity are subject to random spot checks, with a requirement for documentation of evidence, and the potential for the creation of a significant level of debt. For example, the documentation provided to parents indicates 'If your work hours change each fortnight, you need to give us an estimate of your hours. Estimates should be the highest number of hours you expect to work in a fortnight over the next 3 months' (Services Australia, 2019). However, parents are also warned that they may be subject to spot checks and be required to provide evidence of their level of activity. But there appears to be no guidance on what happens if the 'expected hours' do not eventuate, or any warning to parents of the potential debt they may incur. These concerns about activity related debt are consistent with the data from the Child Care Package Family Survey reported in Chapter 4.

As detailed above, parents' views on the ease of reporting on the activity test were on balance positive, with just over half (51.4 per cent) agreeing (although only 6.1 per cent strongly agreeing), 29.4 per cent neither agreeing nor disagreeing, and 19.2 per cent disagreeing, although around half indicated they were worried that they would end up with a reconciliation debt if they did not get their details right.

Against this background, services and stakeholders expressed some concern about parent understanding of the activity test, particularly where the parent/carer is engaged in casual or intermittent work, or undertaking non-paid work activity, that would be eligible towards meeting the activity test. Services, who, as reported in Section 3.3.2, saw the activity test as having a negative impact on their operation, reported that they had experienced a number of cases where families did not recognise that these were eligible activities, referring to a range of circumstances including farming activities and volunteering. One stakeholder referred to their experiences working with parents who often had unstable working arrangements:

… for many families and particularly for women at the bottom end of the labour market … circumstances would be constantly changing … women who are on casual rosters and on short term contracts and highly variable work arrangements, and for them to navigate the complexity of the activity test … It was much more likely that women would think, 'Oh no, I'm not going to be able to access that subsidy because I don't have stable work. And I can't be sure that I'm always going to meet the activity test and I don't want to take the risk that one fortnight I'm going to lose it.' And so that they would rule themselves out 
[Child care stakeholder, November 2018]

This lack of understanding of the operation of the activity test, and of reporting, was also evident in responses from parents:

My husband lost his job, and after a few months, we changed his income and were entitled to a higher rebate. However, as I didn't adjust his hours for 'looking for work' and, on paper, he was technically doing 0 hours work, we got less than one day subsidised care. Our weekly child care cost jumped to $1000 without notice for the 3 days our children attended. We could not pay this until my husband resumed work, and we couldn't withdraw them from care because we would not have been able to get them back in. We had to take out a loan. 
[Family using CBDC, October 2019]

Some of the questions on the forms around CCS need to be clarified. As I know I incorrectly put down my weekly instead of fortnightly hours and had to submit a correction. In particular, more definitions or examples would be helpful. It can be confusing for parents. 
[Family using CBDC and OSHC, October 2019]

The Income Test and costs of care

Different experiences of understanding child care costs have been evident in the comments by parents in the qualitative interviews and surveys. Overall, parents considered they did know how much child care was costing them, although there is little evidence of this understanding having improved with the introduction of the Child Care Package.⁴⁸ In November 2018, 74.8 per cent of families in CCPFamS strongly agreed or agreed that they knew how much child care was costing them, and this compares to 73.5 per cent of the same respondents having indicated in May 2018 (in the DESE/ORIMA survey) that they knew how much child care was costing them.⁴⁹

Notwithstanding this general response, there were extensive comments made by parents in the data collections that highlighted some specific problems parents encountered, or where they felt that the system could be improved. These included:

CCS is very hard to predict. Once I started working more I didn't know how much I'd need to budget until my first direct debit from day care came in. It seems arbitrary and all the calculations, for a working parent are ridiculous. Create a calculator that a parent can access online, that would help greatly. 
[Family using CBDC, October 2019]

I think because I went back to work more hours, it increased the percentage I had to pay. It wasn't a huge debt … Annoying though … It was far easier when it was the 50 per cent. Life is busy enough, without constantly thinking about changing my income and work details. I do not have the time for that. 
[Family using CBDC, October 2019]

Related to this, parents also reported difficulties in understanding how their child care costs would be impacted by changes in circumstances. According to findings in one of the case study sites, this was exacerbated in situations that involved possible transition from income support payments to employment, in which parents were unclear how their income support and rent assistance payments would be affected, along with not understanding how much child care would cost them.

The issue of having a calculator to assist parents work out their child care costs was, as identified above, raised on a number of occasions. Prior to the transition to the Child Care Package, online estimators were available to help parents determine their eligibility for child care assistance under the new arrangements, and help them estimate their future costs of child care. Initially, an estimator was made available through the DESE website. From April 2018, the Services Australia Payment and Service Finder was enabled, and the DESE estimator was disabled.⁵⁰ The Services Australia Payment and Service Finder continues to be available. Comments from families in the November 2018 CCPFamS indicated greater satisfaction with the initial DESE calculator provided during transition, when compared to the Services Australia one.

I used to use the child care calculator to work how the costs would change if I worked more or less. The website seems to have changed (sometime before the transition) and now it is far less helpful. Having to answer questions to see what payments I might be eligible for before being able to move to the calculator I was hoping to quickly pop some figures in. 
[Family using CBDC, October 2019]

The existing Services Australia estimator first steps parents through whether they are entitled to other subsidies and payments administered by Centrelink/Services Australia, so is a more complex process than some parents are seeking, particularly those that are not seeking any information about government assistance other than for child care. Further, this estimator does not provide a straightforward means for parents to experiment with different work hours or child care characteristics to determine their child care costs under different scenarios. The initial DESE estimator allowed parents to do this. Some of the large providers have developed their own estimators that are available through their websites to fill this demand.

Interactions with Centrelink

Many comments in the evaluation data collections about families' experiences of CCS refer not to the subsidy itself, but to experiences of needing to rely on Centrelink for information or assistance, or what parents saw as the complexity of Centrelink processes and inadequacy of information. This was apparent from parent reports in the CCPFamS. In 2019, comments specifically about Services Australia/Centrelink centred on a number of key themes about poor customer service and long waiting times for assistance from Centrelink, information being difficult to understand, difficulties navigating myGov and long waiting times for end of financial year balancing.⁵¹

An example of the adequacy/clarity of information and the time taken in dealing with Centrelink is illustrated in one parent's report:

When applying for child care subsidy or updating my family income estimate, the website doesn't explain very well that if you're on maternity leave you leave your hours at 80 per fortnight for up to 12 months post baby being born. It doesn't give you the option to tick 'on maternity leave' so I had to call Centrelink and wait for 55 minutes to get through to a customer service representative to find that out. 
[Family using CBDC, November 2018]

3.2.5 Services' perspectives on parents and simplicity

Services who participated in the case studies largely agreed that the move from 2 separate subsidies to a single subsidy was more streamlined for families and that, aside from initial issues during the transition, most families had become competent at navigating myGov, updating their income and hours of activity, and managing enrolments. However, consistent with findings of the Evaluation Stakeholder Survey from 2019, service directors spoke of the CCS application process remaining confusing for some families who were new to the process and voiced their concerns that these processes posed particular challenges for disadvantaged or vulnerable families. In this regard, they reported that in their experience the process was also less straightforward when family circumstances required supplementary applications or when families needed to make complex calculations, for example calculating hours of activity when a parent is engaged in casual or intermittent work.

A consequence of this was that many services reported needing to assist families to understand or navigate through some of the less obvious elements of the new package.

I've got my teams now and they regularly search out information that's not promoted. It's an 'in the back' 'in the fine print' process that directly affects our frontline staff and it affects our families. The intricacies of the administration that is probably not visible or understandable to the families. 
[CBDC and OSHC stakeholder, April 2020]

Issues cited included understanding the reconciliation process at the end of the financial year and how accrued debt would be recouped, the 8-week rule (in data collected before the changed policy), the need for a child to be physically present on their last day of enrolment at a service, and how the billing cycle works when the hours of care used by a family are greater than the number of subsidised hours they receive.

3.2.6 Simplicity and parents - summary

The above analysis suggests that while the child care arrangements introduced with the Package are somewhat simpler, from the perspective of parents, the extent of change is quite small. At best, parental views on aspects of the system are weakly positive, including with regard to accessing information, understanding it and applying it to their operational interface with the payment system. While, on one hand, many families were able to 'set and forget' their child care payments once they had navigated the initial processes - which could be challenging for some - for others it was more difficult.

In particular, the analysis suggests that the system is seen as less simple by those with unstable or varying employment, and also by higher income earners. This latter, though, is a relatively small group and their attitude is likely to also reflect the extent to which they are now having to interact with a means tested payment and with Centrelink, rather than the more universal Child Care Rebate. For those who are already dealing with uncertainty in employment this, in turn, can be amplified by their concerns with how this impacts their child care assistance.

Underpinning parents' attitudes are a wide range of more specific issues. One element of this concerns the lack of responsiveness of the system to queries and problems, with Centrelink being seen as central to this, and, more generally, that when problems do arise they can take a very long time to be resolved. One specific aspect of timing, identified here but also discussed in Chapter 6, relates to the initial approval process and the Departmental view that services should charge full fees over this period.

While some of the analysis suggests that parents' experiences have improved as they have become more familiar with aspects of the system, this would appear to relate more to their level of understanding, rather than seeing the actual system as being simpler. Ease of access to information about the CCS is viewed less favourably than a number of other aspects of the program.

3.3 Services and simplicity

As discussed in the introduction, in the evaluation a key challenge in assessing the service perspective and experience of simplicity in the new arrangements was the significant complexity and high workload that services experienced in the transition process (see Chapter 10) and the way this permeated their responses. This was exacerbated as the final phase of research for this question, which was to involve an additional survey wave of services at a time more removed from the introduction, was curtailed by the COVID-19 pandemic.

3.3.1 Service understanding of the Child Care Package

As is the case for families, service understanding of the Child Care Package is both a reflection of the simplicity of arrangements and of their having the prerequisite knowledge to function within the arrangements. Just prior to the introduction of the Child Care Package, about half the services rated their understanding of the Package as poor or fair. By the second wave of the services survey in July 2019, there had been a marked improvement in understanding, with fewer than 15 per cent reporting their understanding was only fair or poor. A similar percentage rated their understanding as excellent, see Figure 21.

Figure 21: Services' assessment of their understanding of the Child Care Package, SELCS, June 2018 and July 2019

Source: Survey of Early Learning and Care Services, May/June 2018 and July 2019

This pattern of increase is seen across all sectors, see Figure 22, and is particularly marked in the Centre Based Day Care sector, where there was an average full category improvement in self-reported understanding. The lowest level of understanding, in both waves, was reported by Outside School Hours Care services.

Figure 22: Services' mean assessment of their understanding of the Child Care Package, by service type, SELCS, June 2018 and July 2019

Notes: The chart shows the mean score on a 5-point scale centred on those who report a fair understanding. The weights attached were: 'Poor' -1; 'Fair' 0; 'Good' 1; 'Very Good' 2; 'Excellent' 3.

Source: Survey of Early Learning and Care Services, May/June 2018 and July 2019

Those reporting a poor understanding in July 2019 were asked which aspect or aspects of the Package they found difficult to understand. While only a limited number of observations were recorded, one recurrent theme concerned a lack of understanding about back-payments of subsidy and whether these would go to services or families. The Department provided more advice to services about this in 2019 but, given the curtailment of the data collections, it is not possible to determine whether this has been wholly addressed.

3.3.2 Services' perspectives on simplicity

In the SELCS, in addition to asking about their assessment of parents' understanding of the policy and of simplicity from a parent's perspective, services were asked if they thought the changes introduced in July 2018 had led to a simpler process for child care payments for services. Responses from services in July 2019, as illustrated in Figure 23, were disparate across services and within sectors. Across services, as a whole, 5.6 per cent strongly agreed that it had, with a further 31.2 per cent agreeing. The largest group, 32.6 per cent, neither agreed nor disagreed, while 19.3 per cent disagreed and 11.2 per cent disagreed strongly.

While Centre Based Day Care services showed the same pattern as the aggregate, as shown in the chart:

• Family Day Care Services, which had a similar proportion in the 2 categories of agreement to Centre Based Day Care, had a much higher proportion disagreeing, and disagreeing strongly, and fewer providing the neutral response.
• A similar, although less extreme, pattern was seen among Outside School Hours Care services.
• Responses in the In Home Care sector were more polarised. While this sector had the highest proportion of services strongly agreeing (8.3 per cent), it also had the highest proportion disagreeing (24.4 per cent) and strongly disagreeing (35.6 per cent).

Figure 23: Agreement with statement 'Changes to the child care system has led to simpler process for child care payments to services', SELCS, July 2019

Source: Survey of Early Learning and Care Services, Wave 2 July 2019

Multivariate analysis, however, suggests the In Home Care service response reflects a range of other factors. While, overall, the model only had a limited fit (r² = 0.074) and many of the parameters were non-significant, there was no statistically significant findings by type of service, and the magnitude of the coefficients for service type were generally small. There were limited state effects, with both Tasmanian and Australian Capital Territory services being more positive. Services with larger numbers of staff tended to be less positive, while those who simply relied on the Provider Entry Point⁵² were more positive. The strongest association was with services' perceptions of their financial viability, with those services who reported positive financial viability reporting more positively on the new arrangements as being simpler. However, it is not possible to determine the direction of causality in this relationship - or even if the 2 are directly related - or may be the result of another factor; for example, management capacity.⁵³

The polarity of views about this was also apparent when discussing simplicity with services in interviews in mid-2019 and in the CALD case study in late 2019. There were diverse issues raised in these interviews, with many services focusing on the problems they had encountered, including in the transition, or were currently dealing with, rather than addressing the broader question of whether the Child Care Package was simpler and easier for services to understand and administer than the previous arrangements. A commonly raised and reported persistent issue was the workload associated with resolving issues and problems with the CCS. There was similarly a diverse set of perspectives recorded in the Evaluation Stakeholder Survey (August 2019), with comments again referring to the challenges in needing to put resources into helping families with their CCS applications and, in particular, in providing these supports to disadvantaged or vulnerable families.

Services were asked, in the SELCS in July 2019, to report on the impacts on their service of different aspects of the Child Care Package, see Figure 24. The most adverse responses were recorded with respect to the 8-week rule, which as noted in the introduction, has since been revised. This was followed by the application and confirmation process, and the activity test, with lesser, but still a balance of negative, impact being identified for enrolments, the hourly rate caps and income test. The only aspect of the Package that had on balance a positive response was the marginally above neutral response to the question on the impact of reporting attendance.

Figure 24: Aspects of the Package that have an impact on services, mean score, SELCS, July 2019

Notes: The chart shows the mean score on a 5-point scale centred on those who neither agree nor disagree. The weights attached were: 'Large, positive impact' +2; 'Small, positive impact' +1; 'No impact' 0; 'Small, negative impact' -1; 'Large, negative impact' -2.

Source: Survey of Early Learning and Care Services, Wave 2 July 2019

As noted, the question on 'families completing the CCS application and enrolment confirmation' had the second most negative response, with 24.6 per cent of services reporting this process had a large negative impact and 41.0 per cent reporting it had a small negative impact. Another 18.1 per cent reported it had no impact, 11.0 per cent a small positive impact and 5.2 per cent a large positive impact. The negative reports by services were related to their needing to support families through the application and enrolment process, and to support them in communicating with Centrelink. While not directly indicating whether or not these elements of the Package represent a move towards simplicity, they provide insight into which aspects involve additional work and more complex operations.

Operation of safety net programs

Services were also asked questions about the ease of undertaking a number of tasks related to the 2 safety net programs, Additional Child Care Subsidy (ACCS), and the Inclusion Support Program. Mean scores, with a positive score indicating the degree to which the task was seen as easy, are shown in Figure 25. In broad terms, while there were differences between the specifically identified elements, the table suggests that while ACCS was the easier for services to operationalise (although 2 out of 3 specific aspects were on average rated towards difficult, from a base of neither easy nor difficult), a much higher burden arose in the case of the Inclusion Support Program, particularly in the preparation of a Strategic Inclusion Plan.

Figure 25: Ease of process, aspects of safety net programs, mean score, SELCS, July 2019

Notes: The chart shows the mean score on a 5-point scale centred on those who neither agree nor disagree. The weights attached were: 'Very easy' +2; 'Mostly easy' +1; 'Neither easy nor difficult' 0; 'Somewhat difficult' -1; 'Very difficult' -2.

Source: Survey of Early Learning and Care Services, Wave 2 July 2019

3.3.3 Issues arising out of the experiences of services

In the 2019 data collections, most services reported that the majority of families were managing to successfully navigate the CCS application process independently, and that families' understanding of the CCS had improved since the transition period. However, services echoed the previously raised concern that when a problem arose with a CCS application, or subsidy payments, it was often difficult to resolve, and that this frequently placed a burden on services. This kind of comment was typical:

If you really think, out of the 1,000 children that we have, we probably have issues with less than 50. … but the ones that we do have problems with can cause us weeks of problems. 
[FDC provider, October 2019]

While it is not possible from the qualitative data to determine the magnitude of incidence of this type of problem, nor the extent to which it always reflects a lack of simplicity in the system, this section reports some of the issues that were reported to the evaluation.

Applications and Centrelink

Problems with Centrelink were a recurrent theme of many responses. Services reported long delays in Centrelink processing applications for CCS for a minority of their families. While services were not always sure of the cause of the delay, they cited examples such as processing errors by Centrelink, immunisation records not being up-to-date or supplied, and some issues with CRNs. Former BBF services reported a range of issues associated with families not having documentation such as birth certificates.⁵⁴

A number of services argued that the requirement for families to apply for CCS through Centrelink had increased the complexity of child care assistance for families. They noted that it was difficult for families to contact Centrelink, particularly for families for whom English was not their first language, with services commenting on Centrelink using confusing terminology. Additionally, there were multiple reports of Centrelink providing incorrect or incomplete information for example not telling families about other payment types that they could be eligible for, such as ACCS temporary financial hardship, as well as some services reporting that they found advice and support from Centrelink was variable across different Centrelink staff. Again, while the specific issues raised by services in these discussions were not able to be followed through by the evaluation to ascertain the validity of criticisms of Centrelink, the extent of reporting of this type of issue suggests it does have substance.

According to interviewed services, some families were spending a long time waiting on the phone for support from Centrelink. Many services reported that families made a number of visits to Centrelink to resolve issues and that they needed to prepare families to visit Centrelink by providing them with screenshots and print-outs of Child Care Package policy.

A further issue raised by some services related to ACCS (Child Wellbeing). Whereas under the previous arrangements, child care services could contact the department responsible for Special Child Care Benefit claims, with the Child Care Package ACCS (Child Wellbeing) claims are processed by Centrelink and services reported that they had been advised that Centrelink cannot discuss these claims with them.

Enrolments

Another recurrent issue raised was that of the enrolment process. For parents, there are 2 main steps to their enrolment in child care following registration for CCS through myGov. The first is agreeing to a Complying Written Agreement (CWA) with the service. The second is confirming the enrolment. This step involves logging into myGov, reviewing and confirming the child's details, and accepting the declaration. Many services reported a lack of understanding by families of the need to do this second step, and the workload in having to follow up with families:

You've got to constantly chase those CWAs. All the time. 
[CBDC provider, March 2019]

And the other big issue with all this too, is they'll say, the parent hasn't confirmed … A lot of these people do speak English quite well, but they don't understand these systems. And go on the computer, forget it. They've got to find the daughter, or a son or like, you know, [name] here can help them. They don't know how to manipulate that, go on myGov and confirm it. They can't do that. They can't even understand what I'm saying to them. 
[CBDC provider, June 2019]

A number of services reported it was difficult to support families to use myGov because they did not receive any information about myGov and did not know what families needed to do. A further issue, which is more fully addressed in later chapters, concerned the fact that services are advised to charge full fees until CCS eligibility is determined.

Other issues

Services reported that when problems arose in families' enrolment or CCS payment, they could not always locate the source of errors or the problem (although some cited what they saw as IT system 'glitches' and Centrelink errors) and found it difficult to resolve issues. A pattern of cyclical help-seeking by families and services was reported in a little over half of the interviews with services in 2019. These services reported spending substantial amounts of time contacting third party software providers, the CCS helpdesk⁵⁵ and sending families to Centrelink, but then having families referred back to the service, without issues being resolved.

Service directors who participated in the case studies noted that this frustration is exacerbated by services being prevented from directly liaising with Centrelink on specific queries about the subsidy arrangements of families, and this has contributed to delays in resolving issues:

We thought it would be a little bit more streamlined. We would be able to ring up and have a lot more access to parent's data […] Hopefully that might change down the track. We are approved providers. We've done our police checks to get access to query data. So, I do not know why we can't just find out that bit of extra information. 
[CBDC provider, April 2020]

The other issues raised were predominantly payment-related, with services citing issues such as an incorrect overpayment of CCS, session reports that would not submit, or backdated readjustments to CCS payments that required a service to manually find the period which had been adjusted. The following quote provides an illustration of how one Family Day Care provider described the impact of the Child Care Package on their work. This experience was typical of comments provided by a number of services about the impact of the Child Care Package in relation to their services' administration and workload.

So, each of these issues is taking really complex problem solving and a huge amount of investment in terms of time to work through each of these issues to get outcomes for families. And our resourcing is the same now as it was when the changes came in on July 1. And we're struggling to keep up with the demands, and every time the team feel that they are getting on top of some of these issues or they're getting a better understanding of how this is working, another issue comes out left field. And to be honest with you, there's a word that we use in here, at our team meetings that I'm going to share with you, and that is that it's `relentless'. 
[FDC provider, April 2019]

Service information sources and help-seeking

For services' access to support on their own issues, there were mixed reports from interviewees about the utility of the CCS helpdesk. Some interviewees reported avoiding the helpdesk, finding it too slow. Others found that issues were resolved, but that it took a long time and many exchanges. These perspectives can be seen in interview responses:

I very rarely ring them because it's too long and too drawn out. I just go through my software provider. And try and get the answers from there. 
[OSHC provider, March 2019]

Software providers, as cited in this quote, were frequently mentioned by services as a source of information and support. This included for basic information about the Child Care Package as well as resolving issues such as changes to enrolments or payments. For some services interviewed in 2019, the software provider was reported as their first point of contact to resolve issues or queries.

3.3.4 Summary simplicity and services

As with parents, there were mixed views by services as to the impact of the Package on simplicity with no strong consensus. Indeed, it was split into 3 almost equal groups - with just over a third saying it had made things simpler, a third that it had made no difference and just under a third disagreeing. Services on average reported a negative impact from a range of specific aspects of the policy. This included the 8-week rule, which has now been addressed, and the enrolment process - especially around confirmation. While the operation of the ACCS generally does not appear to be overly burdensome, a more negative assessment was given to aspects of the Inclusion Support Program.

A core theme was that while problems tended to be the exception, rather than the rule, when they did occur, they were difficult and slow to resolve, and support for resolution from both the Child Care Subsidy Helpdesk and Centrelink was often slow or lacking.

3.4 Summary

On balance, the data suggests that the Child Care Package can be seen as being a little simpler than the former arrangements. However, the perspectives of both services and parents, while on balance pointing to this, show a diverse experience, with the system becoming simpler for some, but more complex for others. This would appear to be a persistent finding over time, notwithstanding the extent to which both parents and services have become more confident and knowledgeable about the system, especially the operation of the Child Care Subsidy.

Some of the factors that appear to be particular blockages to system simplicity include:

• the initial enrolment process, and specifically:
  • the 2-stage application process; in particular, the confirmation step
  • initial assessment of the amount of subsidy families are entitled to and the subsequent issues with the policy that services should charge full fees over this period
• problems for people who have irregular or unstable employment and/or earnings with regard to both the activity and income test
• Parents, while reporting some improvement in being able to understand subsidy information, still report negatively on this, and do not report any increased ease of access to this information.
  • One specific issue is that of the Centrelink calculator and the ease with which parents can explore how their activities impact the support available to them through the subsidy.
• poor problem resolution; in particular, the time taken to resolve issues. Specifically, across the range of service reporting there was a view that while most interactions were unproblematic, when problems did arise, these were frequently very difficult to resolve. Issues identified by them related to:
  • the Helpdesk - which was generally reported to be slow
  • Centrelink, with problems relating to attempting to make contact, inconsistent advice (often with a lack of understanding of child care related programs). Centrelink was also poorly reported on by parents.

While the replacement of the 8-week rule addressed one of the major concerns, these other issues persist.

4. Child care costs, subsidies and affordability

A key objective of the Child Care Package was to improve affordability, especially for 'low- and middle-income families' and address increasing costs. This Chapter reports on the extent to which these outcomes and impacts have been achieved. This addresses the evaluation outcome that 'Child care is affordable to families especially those with limited means'.

This Chapter considers:

• some of the conceptual issues related to defining affordability and the approaches adopted by the evaluation
• an overview of the elements of the Child Care Subsidy (CCS) system, as well as the previous funding arrangements, that directly impact affordability and the extent to which different segments of the child care user population are impacted by each of the key changes
• the number of families affected by the replacement of the special child care payments (Grandparent and Special Child Care Benefit and JETCCFA) with the Additional Child Care Subsidy (ACCS)
• analysis of trends in child care fees over time, and more specifically following the introduction of the Package
• parental perceptions of affordability and changes in affordability
• microsimulation modelling of the first round direct effects of the impact of the Package on affordability overall, and for different groups of users. This is the key focus of the evaluation of the impact of the Child Care Package on affordability.
• analysis of the extent to which child care users are incurring debts to the government as a result of the annual income reconciliation process.

In addressing these questions in the evaluation, it is noted that the time frame of the evaluation is limited to the first 18 months of operation of the Child Care Package which means that the longer run impact of the Package on child care fees and affordability is not considered in this evaluation.

As noted above, the primary focus of the analysis of the impact of the Child Care Package on affordability is a static microsimulation of the comparative affordability outcomes of the Child Care Package relative to the former funding arrangements. As a consequence, affordability is largely considered from the relative perspective of whether child care under the new CCS is more affordable than it was under the former Child Care Benefit/Child Care Rebate System. Static in this context means that the analysis focuses on the outcomes of these 2 systems on the same structure of child care usage and same child care fees. It does not take any account of the extent to which patterns of use of child care may have changed as a result of the introduction of the Package, nor the impact of fee changes (which may or may not be attributable to the introduction of the Package).

4.1 Defining and measuring affordability

The concept of affordability of child care is open to many different interpretations. Economic theory assumes that a family purchases a bundle of goods and services and takes decisions on the trade-off they make between work and 'leisure' in ways that maximise wellbeing (utility) subject to the financial resources available and preferences. Differences in preferences result in different expenditure choices and thus what is an affordable price is a normative question that will vary between families with the same financial resources. Stated differently, affordability depends in part upon the trade-offs that families are prepared to make between different consumption bundles. For discussions of the definition of affordability see Maclennan and Williams (1990) and Niëns et al. (2012).

These sorts of issues can be seen in the decisions people make. Some will consider affordability in terms of the net gain they will obtain from working and purchasing child care to enable this. Others will place this in a longer-term perspective and see the cost of care as an investment. This could be an investment in their own future earnings through minimising time out of the paid workforce while caring for young children to maintain or further develop their human capital, through education or maintaining career progression. In these cases, they will view the cost relative to these future returns. Others may see it more through a lens of investment in their children's development - and will weigh up the cost relative to other investments they can make, including the trade-offs of their own time. Linked with this type of consideration are questions about the quality of care. That is, it is not just the actual cost that is important, but rather the value of the service that is being purchased. This consideration is not just one that is taken in deciding between different types of formal child care, or between what is being offered by specific child care services,⁵⁶ but also whether to use formal care, or unpaid or other informal care arrangements.

4.1.1 Evaluation approaches

In this evaluation we are taking 2 approaches to measuring affordability and change in affordability. The first approach is on the conventional measure of the net child care costs incurred by families (out-of-pocket costs) relative to income. The conceptual basis is that the lower the child care costs incurred by families relative to their income, the more affordable child care is. This approach uses the results of modelling of entitlement to child care subsidies under the previous CCB/CCR system and the new CCS system. The second approach draws on parents' assessments and perceptions of: (i) whether they consider child care to be affordable; and (ii) the extent to which they consider child care costs have been impacted by the amount of child care they are using. These self-report measures, while lacking the apparent 'objectivity' of costs relative to income measure, can be seen as better capturing the full range of factors that go into determining whether families consider child care is affordable. In all of the analysis the focus is on the extent to which the affordability of child care has changed since the introduction of the CCS Package in July 2018.

4.1.2 Modelling - Child care costs relative to income affordability

Two ways of modelling the impact of the CCS Package on affordability have been undertaken. These differ in the data sources used and how child care cost relative to income is calculated. The main modelling has been undertaken using administrative data from the CCS system. This is a rich dataset from a child care operational perspective which permits a very detailed review of the impact of the subsidy arrangements on families, but is limited in that the only measure of income is that of the parent, and, if they have one, their partner's, taxable income (i.e. gross or before-tax income). From an affordability perspective this is a limitation because affordability needs to be considered in terms of the actual resources available and the measure of gross income that is available from the administrative data ignores the amount of income tax they have to pay, and also does not account for the number of people in the household who this income needs to support. A consequence of this is that comparisons between households who may be spending similar proportions of gross income on child care may be misleading.

This modelling using the administrative data from the CCS system has therefore been supplemented by modelling based on the Australian Bureau of Statistics (ABS) Survey of Income and Housing. While the modelling based on the Survey of Income and Housing does not permit the same degree of precision in estimating the actual costs and subsidies for child care as the modelling based on the administrative data, it does permit the change in costs to be considered on the basis of the household's after-tax (disposable) incomes, and on the basis of equivalised income that takes into account the different needs of households with different compositions.

As has been noted above, this modelling is primarily focused on relative affordability - addressing the question of how the affordability of child care for families changed with the introduction of the new Package.

4.1.3 Self-reported affordability of child care

Data on parents' assessments of the affordability of child care is drawn from the 4 waves of DESE/ORIMA family surveys, the first of which was collected in June 2018 just prior to the introduction of the Child Care Package. Data on self-reported affordability of child care considers both the perspectives of those parents who are currently using child care and parents not using child care. For parents using child care, the data covers parents' assessment of affordability per se, collected before and after the changes to the child care system, assessment of the financial impact of the Child Care Package and whether child care is value for money. For parents not using child care, the data covers their assessment of the extent to which affordability is a barrier.

4.2 The structure of the Child Care Package and affordability

This section describes the structure of the child care subsidy arrangements under the Child Care Package and the former funding arrangements that directly impact affordability, and examines the extent to which the key structural elements of the CCS impact families using child care.

4.2.1 Elements of the CCS

Key elements

The key aspects of the Child Care Package introduced in July 2018 are described in Chapter 1. Under the Child Care Package and the new CCS there are 4 components which determine the rate of CCS and, hence, the amount of child care payment to which families are entitled. These are:

• hourly rate caps, which limit the hourly fee charged by child care providers that will be subject to the subsidy⁵⁷
• the percentage rate of CCS families are eligible for, which applies to the capped hourly fee. The subsidy rate commences at a rate of 85 per cent of the fees paid, up to the hourly rate cap, and then is tapered, in stages, as family income increases, becoming zero for families with income at or above an annual income of $351,248 (2018-19 level).⁵⁸ One feature of this rate structure was that of ensuring that parents made a co-payment towards the cost of child care⁵⁹
• the annual cap, which is the maximum amount of CCS that will be paid to a family in any one financial year. In 2018-19 it was $10,190 per child per annum. The annual cap only applies to families with an annual income over $186,958 (2018-19 level)
• approved hours as determined under the activity test. Families are subject to an activity test that limits the maximum number of hours of CCS a family is entitled to on a per child per fortnight basis, with the number of hours determined by the level of activity parents are undertaking. For couples, the activity test is based on the hours of activity of the member of the couple with the fewest activity hours. There are exemptions to the activity requirements in certain circumstances. Details of the maximum hours of subsidy per child under the activity test and exemptions are provided in Chapter 1, Table 1.

The type of care being used also has an impact on the amount of CCS that can be received because there are some differences in the hourly rate caps between children below school age and school-aged children, and between Centre Based Day Care and Outside School Hours Care and Family Day Care. For In Home Care the hourly rate cap operates on a per family basis.

Safety net support

While the CCS is the main form of government financial support for the costs of child care to families, families and children who may face barriers in accessing affordable child care may be eligible for the Additional Child Care Subsidy (ACCS). The ACCS is paid to services as an offset to the charge to parents. To be eligible to receive ACCS, a carer must be eligible for CCS and meet one of the following criteria: an eligible grandparent getting an income support payment (ACCS (Grandparent)); transitioning from certain income support payments to work (ACCS (Transition to Work)); experiencing temporary financial hardship (ACCS (Temporary Financial Hardship)); or caring for a child who is vulnerable or at risk of harm, abuse or neglect (ACCS (Child Wellbeing)). The amount of ACCS received depends on the type the family is eligible for. Irrespective of the type of ACCS being received, subject to the specific conditions of the support, there is no annual cap on the amount of ACCS received. ACCS payments are not subject to a withholding amount and the ACCS payments are not balanced at the end of the financial year. The amounts of ACCS that can be received are:

• Under the Grandparent, Temporary Financial Hardship and Child Wellbeing elements the amount is the lower of: 100 per cent of the fee charged where it is equal to or below the hourly rate cap; or up to 120 per cent of the hourly rate cap where the fee charged is above the hourly rate cap.
  • While there is no time limit on how long a person can receive ACCS (Grandparent), ACCS (Temporary Financial Hardship) is paid for up to 13 weeks, and ACCS (Child Wellbeing) is initially available for 6 weeks on the basis of a service's certification and, after this, for a renewable 13-week period on the basis of determination by the Department of Human Services.
• The ACCS rate for the Transition to Work component is the lower of: 95 per cent of the fee charged where it is equal to or below the hourly rate cap; up to 95 per cent of the hourly rate cap, where the fee charged is above the hourly rate cap. The length of time that this subsidy can be received is complicated and depends on whether the person is studying, looking for a job, working or training.

Differences between the old and new subsidy system

The primary focus of the analysis of affordability, as noted above, is on the impact of the Child Care Package relative to the previous funding arrangements. The main differences that will impact the amount of child care payment and hence affordability between the CCS and the previous Child Care Benefit (CCB) and Child Care Rebate (CCR) payments which it replaced are:

• Under the previous system, CCB was a means tested benefit that provided a subsidy for up to 50-hours of child care per child per week. This was complemented by the CCR, which was non-means tested and provided up to 50 per cent of a family's out-of-pocket child care expenses (after CCB was deducted) to a maximum of $7,613 per child per year. The means testing of the full child care payment under the new system make the CCS more targeted than CCB and CCR.
• Under the old CCB and CCR system there was an activity test that had 2 levels. First, a universal 24 hours of care per week (48 hours per fortnight) per child. Second, up to 50 hours per week (100 hours per fortnight) per child for those with more than 24 hours of activity per week.⁶⁰ There was only limited review and testing of claimed activity. The more graduated activity test and number of hours to which the subsidy applies under the CCS means that under the new system there is greater potential for families to need more hours of child care than they are subsidised for and hence to have a proportion of the hours they pay for unsubsidised.
• While there is an hourly rate cap under the new CCS system, there was also an implicit hourly rate cap that operated via the maximum subsidy rate of CCB and the fact that CCR only applied to 50 per cent of the net (post CCB) fee.

The relative size of the subsidies under the CCB/CCR system compared to the CCS system depends on a range of factors including income, number of children using care, level of activity, number of hours of care used and the hourly fee paid for services.

Under the old child care system, additional support for some families was available through Jobs, Education and Training Child Care Fee Assistance (JETCCFA), Grandparent Child Care Benefit (GCCB) and Special Child Care Benefit (SCCB). The JETCCFA provided financial assistance to eligible parents who qualified for the maximum rate of CCB and it paid for most of the gap in out-of-pocket costs while a parent was working, studying or training. SCCB was available for families experiencing financial hardship or for children at risk. Grandparents who were primary carers of a child may have been eligible for GCCB. SCCB and GCCB could be up to the full costs of child care and were not subject to an activity test.

4.2.2 Hourly fee rate cap

As outlined in Chapter 1 and in Section 4.2.1, the Child Care Package introduced an hourly rate cap, which is a limit on the hourly fee charged by child care providers that will be subject to subsidy. This will have an effect on affordability as one of the consequences of this cap is that parents need to fully pay for any cost of child care above the hourly fee rate cap.

The hourly fee rate cap is seen as having an important role to play in seeking to contain increases in the cost of child care. As discussed in Section 4.3 and further explored in Chapter 5, the concept of hourly fees in child care services is not straightforward. This is because most children are provided care on a sessional basis, rather than on an hourly basis. In turn, sessions are variously structured to meet several disparate objectives. First, they provide a structure for the operation of a child care service, allowing services to plan to offer a certain number of child care places for specific sessions and to organise staffing schedules around these. Second, they provide flexibility for parents around start and finishing times, with longer sessions allowing for this. Third, there are interactions, considered further below, between session structure and lengths and the operation of allowed hours under the activity test.

While most services do adopt a sessional structure, some instead charge by the hours of actual use (see Chapter 5). Additionally, when services offer multiple sessions, the hourly fee they charge parents can vary significantly across sessions, especially where shorter sessions have been introduced as a means of avoiding the strictures of the activity test.

In this context, while the child care hourly rate plays a very important role in the determination of the actual rate of subsidy paid to parents, it is also very much a notional concept, being based on dividing the sessional fee charged to parents by the nominal length of the session. Because of the nature of the administrative data provided by the Department, in this report, estimates of the hourly fee are based on total weekly fees paid and total weekly sessions (hours charged for). While this may slightly underestimate the proportion of fees that are in excess of the hourly cap, the impact of this is considered to be relatively small.⁶¹

The focus in this section is on the impact of the hourly fee rate cap on the subsidy paid to parents. First, the extent to which children have any care charged at a rate higher than the cap, and the proportion of hours paid for that are being charged at a rate higher than the cap, is considered. Second, the extent to which services are charging any families above the cap is documented. Average service level fees in comparison to the hourly rate cap are presented in Section 4.3.1.⁶²

The hourly fee rate cap varies according to the age of the child and the type of care. As of 1 July 2019, the hourly fee rate cap was $11.98 per hour for children below school age and $10.48 per hour for school-aged children in Centre Based Day Care and for Outside School Hours Care, and $11.10 per hour for children below school age in Family Day Care and $10.29 for those of school age. For In Home Care the cap is on a per family basis and is $32.58 per hour. The former CCB had an implied hourly fee rate cap with a maximum rate payable of $4.30 per hour for a non-school-aged child and the rate for school-aged children was 85 per cent of the non-school child rate. The cap rates over the financial year 2018-19 are detailed in Table 17.

Notes: ^a A child is considered to be 'school-aged' if they are in school, including being home schooled, or 6 years or older. Hourly rate caps for all services were increased in July 2019, in line with indexation.

Source: Department of Education, Skills and Employment

Figure 26 shows the proportion of child hours per week being charged over the hourly fee rate cap by service type since July 2018. This data shows a number of distinct patterns by service type:

• While In Home Care only accounts for a small proportion of child hours of care, because a much higher proportion of In Home Care hours are charged over the hourly rate cap, it dominates the chart.⁶⁴ Over time, 2 key features can be seen in relation to In Home Care. The first is the very high proportion of hours charged above the fee cap prior to the 25.6 per cent increase in the cap in January 2019. The second is the trend to an increasing proportion of hourly rates being above the cap since this initial fall in January 2019.
• Centre Based Day Care services showed an increasing proportion of child hours being charged above the cap across 2018-19, before a fall with the indexation of the cap in January 2019 and a slight increase since then. Nevertheless, in the second half of 2019, 15 per cent or more of child hours of care were charged above the cap, compared with some 11 to 13 per cent in the same period in 2018.
• Family Day Care services were more likely to charge above the cap than were the Centre Based Day Care sector, with some 19 to 25 per cent of hours being charged above the cap over the period (excluding the late December and early January period). Again, this sector shows a fall in the proportion of hours of care being charged above the cap with the indexation of the cap. While this initially brought the rate of charging above the cap down in July 2019 below that of a year earlier, there has since been an upwards drift in the proportion.
• The pattern of charging above the cap in Outside School Hours Care is dominated by the differences between this care being provided over the school term and during vacation times. This sector has the lowest rate of charging above the cap.

Figure 26: Proportion of child hours per week charged over the hourly rate cap, by service type, July 2018 to December 2019

Notes: Data shown from 8 July 2018 onward as data for 1 July 2018 was affected by transition issues. For In Home Care the hourly rate is reported at the family level and all children within the family using the In Home Care are assigned the same hourly fee. Where rates vary for school-aged children, as per next footnote all children aged 6 years and over are treated as being of school age.⁶⁴ Weighted by number of hours each child uses the service for.

Source: DESE administrative data

From an affordability perspective the most important issue is the amount by which fees exceed the hourly rate cap. Table 18 presents information, for Q4 2019, on how much above the hourly fee rate cap, the hourly fee is for child hours that are charged at a rate above the cap. The 'excess' charge is presented as a proportion of the hourly fee rate cap. For Centre Based Day Care, Family Day Care and Outside School Hours Care one-quarter of the above cap child hours of care (i.e. the 25^th percentile) are charged only marginally higher than the cap (2.6 per cent to 4.0 per cent). For In Home Care, a quarter of the above cap child hours of care (i.e. the 25^th percentile) are charged at 10.5 per cent above the hourly fee rate cap. However, at the upper end of the distribution (90^th percentile), 10 per cent of child hours are charged at rates ranging from 23.3 per cent above the cap in Centre Based Day Care to 31.2 per cent in In Home Care.

Notes: For In Home Care the hourly rate is reported at the family level and all children within the family using the In Home Care are assigned the same hourly fee. Where rates vary for school-aged children, all children aged 6 years and over are treated as being of school age.

Source: DESE administrative data

Figure 27 shows the proportion of services that charged at least one child an hourly fee that is greater than the hourly fee rate cap for each week. Over three-quarters of Family Day Care services are charging at least one child above the hourly fee, and the proportion of Centre Based Day Care services charging at least one child over the hourly rate cap increases from around 40 per cent in early July 2018 to nearly 60 per cent by December 2019.

Figure 27: Proportion of services charging any child over the hourly fee rate cap, by week, July 2018 to December 2019

Notes: Data shown from 8 July 2018 on, as data for 1 July 2018 was affected by transition issues. For In Home Care the hourly rate is reported at the family level and all children within the family using the In Home Care are assigned the same hourly fee. Where rates vary for school-aged children, all children aged 6 years and over are treated as being of school age.

Source: DESE administrative data

In order to better understand the extent to which this charging above the cap is an occasional occurrence Figure 28 shows the proportion of hours in the quarter being charged over the cap (at the child level) by the cumulative proportion of children being charged below this proportion of hours above the cap. The data is for Q4 2019. This figure shows that, when any time is charged over the hourly cap, in the majority of cases a substantial proportion of hours used by the child are charged above the hourly fee rate cap. For example, of those being charged at least one hour above the cap, just 0.2 per cent of all children have 5 per cent or less of their hours charged above the cap, 4.3 per cent have 10 per cent or less of their hours charged above the cap and 76.2 per cent have three-quarters or more of their hours charged above the cap.

Figure 28: Proportion of hours of care used per child charged over the hourly fee rate cap, by cumulative proportion of children, Q4 2019

Source: DESE administrative data

Table 19 provides information on the proportion of hours of care charged by services that have an hourly fee that is above the hourly fee rate cap for the service, and how this varies according to whether the service is a for-profit/not-for-profit type of service and the geographic remoteness of the service. The geographic remoteness measured, first described in Chapter 2,⁶⁵ is a population/remoteness measure that categorises areas according to whether they are a capital city, if not a capital city the population size, and then for small population areas whether the area is categorised as being an inner regional, outer regional, remote or very remote area.

For Centre Based Day Care, 41.0 per cent of services charge no hours at all above the cap, 27.5 per cent charge 1-10 per cent of hours above the cap, 12.5 per cent of services charge 11-25 per cent of hours above the cap, 5.2 per cent charge 26-50 per cent of hours above the cap, 2.1 per cent charge 51-75 per cent of hours above the cap, 7.6 per cent charge 76-99 per cent of hours above the cap and just 4.3 per cent charge 100 per cent of hours above the cap. A smaller proportion of Family Day Care services charge no hours above the cap (21.0 per cent), with 20.1 percent, 19.1 per cent and 19.3 percent charged 1-10 per cent, 11-25 per cent and 26-50 per cent of hours, respectively, above the cap. For Outside School Hours Care, 52.2 per cent of services charge no hours above the fee cap, and 15.5 per cent charge 1-10 per cent of hours above the cap.

Not-for-profit services are more likely to charge no hours above the hourly fee rate cap than are for-profit services (54.1 per cent compared to 38.2 per cent). There are some differences by geographic remoteness with very remote services substantially more likely to not charge any hours above the fee cap (62.5 per cent) than services in other areas. Services in major cities are the most likely to charge at least some hours above the hourly fee rate cap.

Notes: Excludes a small number of services whose for-profit/not-for-profit status is 'other'.

Source: DESE administrative data

Characteristics of families being charged over the hourly fee rate cap

This section considers how the characteristics of families vary according to the extent to which the number of hours of care they pay for are charged in excess of the hourly fee rate cap. The analysis is based on child care used during Q4 2019. Hours are categorised according to whether they had no hours charged in excess of the hourly cap for the quarter, greater than 0 per cent and less than 50 per cent of hours charged in excess of the cap, 50 per cent to less than 90 per cent of hours charged in excess of the cap and 90 per cent or more of hours charged in excess of the cap.

Overall, in Q4 2019, 76.8 per cent of families were charged no hours in excess of the hourly fee rate cap, 6.2 per cent were charged some hours in excess of the cap but less than 50 per cent of hours in excess of the cap, 4.5 per cent were charged 50 per cent to less than 90 per cent of hours in excess of the cap, and 12.5 per cent were charged 90 per cent or more of hours in excess of the cap.

Table 20 shows the proportion of hours that families at different points in the distribution of hours were being charged in excess of the hourly fee rate cap for Q4 2019. For families who were being charged some hours in excess of the hourly fee rate cap but less than 50 per cent, the median percentage hours being charged in excess of the cap is 15.6. For families being charged 50 per cent to less than 90 per cent of hours in excess of the hourly fee rate cap, the median percentage is 73.4 per cent and for those being charged 90 per cent or more of hours in excess of the cap it is 100 per cent from the 25^th percentile and above.

Source: DESE administrative data

Table 21 shows how the proportion of hours that are charged in excess of the hourly fee rate cap varies according to CCS subsidy income thresholds for Q4 2019. The proportion of hours that families are charged in excess of the hourly rate cap gradually increases with income. Eight in 10 (80.5 per cent) families with an annual income below $66,958 were charged no hours in excess of the hourly fee rate cap, compared to 62.2 per cent of families with an income over $351,247. Correspondingly, 10.3 per cent of families with an income less than $66,958 had 90 per cent or more of hours charged in excess of the hourly fee rate cap as compared to 21.9 per cent of families with an income of over $351,247.

Figure 29 shows how the proportion of hours that are charged in excess of the hourly fee rate cap varies according to income vigintile. The proportion of hours charged in excess of the cap increases gradually with income from around income vigintile 13. Income vigintiles 19 and 20 have a substantially smaller proportion of hours charged at or below the cap (65.2 and 59.1 per cent respectively) and correspondingly an increase in the proportion of families with 90 per cent or more of hours being charged in excess of the hourly fee rate cap.

Notes: Excludes families with missing income data.

Source: DESE administrative data

Figure 29: Extent to which families are charged over the hourly fee rate cap, by gross family income vigintile, Q4 2019

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: DESE administrative data

There are differences in the extent to which families are being charged over the hourly fee rate cap between states and territories and for areas of different population sizes and geographic remoteness (Table 22). Families are much more likely to be charged fees in excess of the hourly fee rate cap in the Australian Capital Territory, followed by Western Australia, Victoria and New South Wales. The states/territories with the lowest proportion of families being charged fees over the hourly fee rate cap are Queensland, Northern Territory, South Australia and Tasmania. This is consistent with the differences in fees between states and territories.

There are also differences in the extent to which families are being charged in excess of the hourly fee rate cap according to population/geographic remoteness, with the highest proportion in capital cities, remote and very remote areas and lower rates in other areas (Table 22).⁶⁶

In terms of child related factors, there are small differences according to the age of the youngest child in the family using child care, with a slightly higher proportion of hours being charged in excess of the hourly fee rate cap for children with a youngest child using care under the age of 3 years than for those with a youngest child aged 3-5 years or 6-13 years (Table 23).

Families being charged for a relatively low number of hours of care per week (up to 10 hours per week for whole family) are substantially more likely to be charged hours in excess of the hourly rate cap and are substantially more likely to be charged in excess of the hourly fee rate cap for 90 per cent or more of the hours of care they are charged for.

Source: DESE administrative data

Source: DESE administrative data

There are interactions between the various characteristics of families, their use of child care and geographic location. To better understand the characteristics of families and location that are charged over the hourly fee cap, a regression model is used. The model estimated is a logit model of the probability of being charged at least one hour in Q4 2019 over the hourly fee rate cap as compared to having all hours charged at or below the hourly fee rate cap. The results of the model are presented in Table 24 using marginal effects. The large sample size means that virtually all of the underlying coefficients are statistically significant and, thus, the focus in this discussion is on the marginal effects that are larger in size. The relationship between income and being charged hours in excess of the hourly fee rate cap is apparent in the regression model, with the probability of those in the 20^th vigintile being charged in excess of the hourly fee cap being 17.8 percentage points higher than the 10^th income vigintile. This appears to reflect the fact that very high income families generally choose more expensive child care services even after control for location, age of youngest child and hours of child care charged per week.

Notes: *, **, *** indicate that the underlying coefficient is significant at the 90 per cent, 95 per cent and 99 per cent confidence levels respectively. The marginal effect represents the change in the proportion of families being charged hours in excess of the cap relative to the base case. See Table 40 for the income ranges that apply to each income vigintile.

Source: DESE administrative data

Large differences between state and territories and population size/geographic remoteness are apparent in the regression model and are similar to those in the bivariate analysis (Table 22). Families with a youngest child using child care aged 6-13 years were 10.9 percentage points less likely to be charged hours in excess of the cap than families with a youngest child of under 2 years. The relationship with hours of care remains with families using less than 10 hours of care per week being more likely to be charged hours in excess of the hourly fee rate cap.

4.2.3 Subsidy taper rate

The second aspect of the structure of child care subsidies that impacts affordability is the rate of subsidy and the extent to which this reduces with increasing family income. As noted in Section 4.2.1 and described in Chapter 1, CCS is a maximum rate of 85 per cent of the capped child care fee for families up to an income threshold (which was $66,958 in 2018-19) and then tapers to 50 per cent on income of $171,958, remaining at this rate up to a family income of $251,248, before again tapering to a rate of 20 per cent at $341,248 and holding at this rate until family income reaches $351,249, beyond which CCS is reduced to zero.

This section considers the number of families that are in the different income ranges and hence subject to a different rate of CCS, and the actual rates of subsidy they obtain. About one-quarter of families have a reconciled annual income below $66,958, and hence the maximum subsidy percentage of 85 per cent of fees (up to the hourly fee rate cap) applies (Table 25). Almost half of families are in the income range between $66,958 and $171,958 per annum and hence receive a subsidy rate of between 85 per cent and 50 per cent depending on where their income is in this range.

Table 25 also shows the mean and median effective subsidy rates received by families in each income threshold group. This is calculated by dividing modelled CCS/ACCS by fees based on reconciled family income. The details of how CCS/ACCS are modelled and the reconciled family income measure are described in Section 4.5.1.⁶⁷ For all income groups up to an income of $251,248 (except for the income group $66,958 to $171,958 for whom the subsidy rate tapers from 85 per cent to 50 per cent), while the median effective subsidy is generally relatively close to the program structure, the mean effective subsidy rate is substantially less than the rate of CCS subsidy. For example, the mean effective subsidy rate for families with an income below $66,958 is 75.3 per cent which is substantially lower than the formal 85 per cent subsidy rate (up to the hourly fee rate cap).

Notes: Based on the income measure that includes reconciled income for the 75 per cent of families for whom reconciled income data was available. For the remaining families, the income reported to Centrelink during the course of the year is used. This means that some families with an income over $251,257 received some benefits during the course of the year. Because the reconciled income measure is used in this table, the average effective subsidy received is modelled based on reconciled income. The table includes families with zero or negative income in the income category up to $66,958. These families are excluded from the modelling and hence the average modelled actual excludes these families.

Source: DESE administrative data

This lower effective subsidy rate for many families, as reflected in the mean effective subsidy rate, is due to the combined effect of the hourly fee rate cap, with 20.7 per cent of hours charged above the hourly fee rate cap in Q4 2018, the impact of the activity test (see Section 4.2.5) and the use of hours in excess of allowable fortnightly hours (see Section 4.2.5). A small number of families in the income range over $186,958 to $351,247 were also impacted by the annual subsidy cap.

Differences in income levels between families with different characteristics, levels of activity and income support/FTB receipt status result in a different distribution of families across the income thresholds that are used to determine the applicable CCS subsidy rate (Table 26). About 4 in 5 (81.9 per cent) of single parents have an income below $66,958 and hence are in the range for the 85 per cent subsidy rate and 15.0 per cent are in the income bracket $66,958 to $171,958 and hence have a subsidy rate that tapers in the range 85 per cent to 50 per cent. Only 14.6 per cent of couple parent families have an income under $66,958 and hence a subsidy rate of 85 per cent. Just over half (55.5 per cent) have an income in the range $66,958 to $171,958 and the remainder have higher incomes with 14.2 per cent in the range $186,958 to $251,248 and hence have a subsidy rate of 50 per cent.

Notes: ^a Family income support/family payment status is derived from the income support and Family Tax Benefit dataset. Full-rate income support means that the families' income is below the threshold beyond which the amount of income support payment is reduced. ^b Variable defined in Chapter 2. Based on the reconciled income measure.

Source: DESE administrative data

As expected, for both single parent and couple parent families that are in receipt of full-rate income support, the vast majority have an income of less than $66,958 and hence are in the 85 per cent subsidy rate. For couple parents that do not receive FTB, 56.4 per cent are in the income range $66,958 to $171,958, 7.5 per cent in the range $171,958 to $186,958 and 19.2 per cent in the income range $186,958 to $251,248.

Table 27 shows how the distribution of families across the income thresholds that are used to determine the applicable CCS subsidy rate varies according to geographic location. There are some differences in the extent to which families are subject to the subsidy taper rate. In capital cities 25.3 per cent of families have an income below $66,958 and hence are in the range for the 85 per cent subsidy rate and 46.1 per cent are in the income range $66,958 to $171,958 and hence have a subsidy rate that tapers in the range 85 per cent to 50 per cent. As population size decreases and remoteness increases, the proportion of families with an income below $66,958 increases. In remote and very remote areas 28.8 and 29.7 per cent, respectively, have an income below $66,958 and a higher proportion have an income of $186,958 to $251,248. The impact of the subsidy taper rate is quite similar in capital cities and remote and very remote areas, with a smaller impact in other areas due to the lower income levels.

There are some differences in the distribution of families across the CCS subsidy rate income thresholds. Families in the Australian Capital Territory and, to a lesser extent, the Northern Territory are much more likely to be in the income range of $186,985 to $254,248 and therefore subject to the 50 per cent subsidy rate than families in the states, and those in Tasmania, South Australia and Queensland are the least likely to be in this income range.

Notes: Based upon the reconciled income measure.

Source: DESE administrative data

4.2.4 Annual benefit cap

As outlined above, there is an annual cap on the maximum amount of CCS per child that families with an income in excess of $186,958 (in 2018-19) can receive. This section provides data on how many families were impacted by the benefit cap in 2018-19.

Only 14,667 or 1.3 per cent of families are estimated to have been affected by the annual benefit cap (Table 28). Among couple parent families, as expected, the vast majority of those impacted by the annual benefit cap have both parents working full-time, along with a smaller number which have one parent working full-time and the other part-time. Virtually all of those impacted by the cap are in couple parent families (14,447 out of 14,667) and the vast majority lived in a capital city (12,876 out of 14,667). Among families with an income above the fee cap threshold ($186,958) and below the income at which entitlement to any CCS is lost ($351,247), 8.7 per cent are impacted by the annual fee cap (Table 29).

Notes: Based on the most commonly reported income during the year income measure.

Source: DESE administrative data

Notes: <20: estimate is too small for publication, sum of row may not equal total. Based on the most commonly reported income during the year income measure.

Source: DESE administrative data

Because the annual benefit cap applies only to families with an income in excess of $186,958, it is of interest to compare the circumstances of the families just above the threshold income who are impacted by the cap and those just below the threshold income who have per child care costs in excess of $10,190 and who therefore would have been impacted by the cap if their income had been higher than the cap threshold. There are 5,290 families with an income in the threshold below the annual benefit cap who received more CCS than the cap and would have had their CCS capped if their income was above the cap (Table 30). Within this income range there is a very similar proportion of families (9.9 per cent) as the proportion of families in the next income threshold range which places them above the cap threshold income and who had their CCS capped (10.5 per cent).

The proportion of single and couple parent families just below the income threshold who received an amount of CCS in excess of the cap is very similar to that in the next income threshold up who had their CCS capped. This is also the case for family activity status and geographic location.

Notes: Based on the most commonly reported income during the year income measure.

Source: DESE administrative data

4.2.5 Approved hours of care and the activity test

The Child Care Package involved significant changes to the number of hours of child care that were eligible for subsidy with the introduction of a more structured, multi-level rigorously applied activity test. This has implications for both access to child care, see Chapter 6, and affordability. In particular, relative to previous activity testing, many families, in particular those on the safety net provision, are eligible for fewer hours of subsidised care. One consequence is that some of these now use hours in excess of their allowed hours. This latter group is the focus of this section.

The new activity test, as described in Chapter 1, introduced a tiered approach with universal access of 24 hours per fortnight (12 hours per week) for low income households who did not meet the activity test, and then tiers of 36, 72 and 100 hours per fortnight above this depending on the number of hours of activity undertaken per fortnight. There are a range of exemptions to the application of the activity test. In addition to the 24 hours per fortnight noted above, these include, for those families who do not meet the activity test sufficiently, 36 hours per fortnight for children to attend preschool where this is delivered through a Centre Based Day Care service, and up to 100 hours per fortnight for those who receive Additional Child Care subsidy.⁶⁸

In some cases, parents may not be eligible for any hours of subsidised care. This includes some families with high incomes that preclude eligibility, some cases where fees are met by a third party, and others where a family fails to meet other CCS eligibility criteria such as residency or immunisation requirements.

In 2018-19, 13.3 per cent of hours of child care paid for were unsubsidised. However, if families that have zero approved hours (largely because of the exclusions noted above) are excluded, the proportion is 9.0 per cent and if families that received no CCS (based on the reconciled income) are excluded, then 5.4 per cent of total hours are unsubsidised.

Overall, 47.4 per cent of families received subsidy for every hour paid for and 52.6 per cent paid for at least one hour of unsubsidised child care during 2018-19 (Figure 30). About one-quarter (24.8 per cent) of families had some but 5 per cent or less of their hours unsubsidised, and 8.4 per cent had none of their hours subsidised. When the analysis excludes families with zero approved hours of care, the distribution is very similar, although the proportion with all hours subsidised increases to 49.8 per cent, and those who have some, but 5 per cent or fewer of their hours unsubsidised, increases to 26.0 per cent.

Figure 30: Distribution of families by the proportion of hours paid for that are unsubsidised, 2018-19

Source: DESE administrative data

Figure 31 shows the mean and median percentage of hours paid for by families that are unsubsidised by the CCS income threshold of the family. The income measure used is reconciled family income. There is relatively little difference in the proportion of hours paid for which are unsubsidised across the taper reduction income ranges⁶⁹ until the $341,248-$351,248 bracket is reached (Figure 31). Families in this group have 21.3 per cent of their hours unsubsidised and for those with an income of over $351,248, 73.0 per cent of hours of child care that are paid for are unsubsidised. While families with an income of over $351,248 will not be eligible for any CCS and hence all hours will be unsubsidised, the measure of unsubsidised hours reported in this section is constructed by aggregating across 12 months hours that were paid for and hours for which CCS was paid and there are fortnights in which the income reported to Centrelink is below the income threshold. Families that have a reconciled income in excess of $351,248 will incur a child care debt to the government that will have to be repaid.

Figure 31: Proportion of hours paid that are unsubsidised, by CCS income thresholds, 2018-19

Notes: Excludes families with zero approved hours. Reconciled family income. Weighted by number of hours paid for.

Source: DESE administrative data

Figure 32 shows the proportion of hours that are unsubsidised by the ranges of approved hours of care. While the proportion of hours that is unsubsidised decreases as the number of allowed hours increases, there are unpaid hours across all of the categories of approved hours including an average of 8 per cent or more of the hours for those who were approved for 72 or 100 hours, although the median value of zero indicates that at least half of the hours are subsidised. For families with 36 approved hours per fortnight, the proportion of hours that are unsubsidised increases to 19.8 per cent. It is 22.8 per cent for those with 24 hours per fortnight of approved activity, and for families with zero hours of approved activity virtually all hours of care are unsubsidised (mean of 97.5 per cent and median of 100.0 per cent).

Figure 32: Proportion of hours paid for that are unsubsidised, by allowed hours, 2018-19

Notes: Weighted by number of hours paid for.

Source: DESE administrative data

The highest proportion of hours paid for that are unsubsidised is in very remote areas (11.0 per cent), followed by remote areas (6.8 per cent) and capital cities (6.5 per cent) (Figure 33). This is consistent with the higher income levels among the child care population in remote and very remote areas and in capital cities, compared to the other areas.

Figure 33: Proportion of hours paid for that are unsubsidised, by urban and regional location, 2018-19

Notes: Excludes families with zero approved hours. Weighted by number of hours paid for. See note on Table 6 for a description of the urban and regional location variable.

Source: DESE administrative data

Table 31 shows the percentage of hours paid for that are unsubsidised by income vigintile. The percentage of hours paid for that are unsubsidised is slightly higher for the lowest income vigintile than for the second income vigintile. The proportion of unsubsidised hours among families with at least one unsubsidised hour, initially decreases as income increases, is then relatively stable for income vigintiles 3-19, and then increases sharply for the highest income group. That is, 56-59 per cent of families that use child care and who are in the lowest 2 income vigintiles have at least one hour of unsubsidised care and, among this group who have at least one unsubsidised hour, about 1 in 5 hours are unsubsidised. Families in the lowest income vigintile have a reported income of under $21,000, which is less than the minimum social security entitlement for full-income support for a family with one child. Families in the second income vigintile have reported income between $21,000 and less than $31,399 per annum, which is less than the minimum full-rate social security entitlement for most families with child care aged children.⁷⁰

If the reported income is an accurate reflection of the family's access to economic resources, then it is difficult to understand how they can afford a significant number of unsubsidised hours. While we are not able to definitely determine the explanation for this, with the data we have available, we think that it is probably in part due to the reported incomes for many of these families not an accurate reflection of their access to economic resources for a range of reasons. These include significant support being provided by family or friends or that the family has significant assets but their income is low in the particular year due to capital losses, business losses or tax minimisation strategies. It may also be the case that child care services are not in fact receiving payment for unsubsidised hours from some of the families in this situation and are 'writing off' their debts.

Notes: Excludes families with zero approved hours. Reconciled family income. See Table 40 for the income ranges that apply to each income vigintile.

Source: DESE administrative data

4.2.6 Trends in the effective child care subsidy rate

This section reports on the trends in the child care subsidy rate received by families, as measured by the child care subsidy as a proportion of child care fees, from the beginning of 2017 to the end of 2019. The proportion of families receiving a child care subsidy rate of zero, greater than zero and less than 50 per cent, 50 to less than 75 per cent, 75 to less than 95 per cent and 95 per cent and over is shown in Figure 34 on a weekly basis. Prior to the introduction of the Child Care Package in July 2018, a large majority of families received a subsidy rate of 50 to less than 75 per cent (mid-60 per cent to just below 80 per cent), and between about 13 and 25 per cent received a subsidy rate of 75 to less than 95 per cent. A smaller proportion received a zero subsidy rate, a subsidy rate of under 50 per cent or a subsidy rate of 95 per cent or more. The effect of families hitting caps towards the end of the financial year can be seen in the figure, with the proportion receiving no subsidy or a subsidy less than 50 per cent increasing towards July 2017, before dropping and then increasing again towards July 2018.

Following the introduction of the Child Care Package there has been a substantial fall in the proportion of families receiving a subsidy rate of 50 or more but under 75 per cent and substantial increases in the proportions receiving 75 or more but under 95 per cent and the proportion receiving some subsidy but less than 50 per cent, reflecting a combination of the shift to income testing the full amount of child care subsidy, the effect of the more graduated activity test and approved hours and some of the other changes. There was also a substantial increase in the proportion of families receiving no subsidy due in substantial part to having an income high enough that they are no longer eligible to receive CCS.

Figure 34: Actual weekly child care subsidy rate received by families, 2017-19

Notes: Uses unreconciled estimate of weekly subsidy.

Source: DESE administrative data

4.2.7 Additional Child Care Subsidy

As discussed earlier, the Additional Child Care Subsidy, as part of the Child Care Safety Net, replaced a diverse range of programs under the previous funding arrangements that provided additional assistance with the costs of child care for families with specific additional needs, including Grandparent Child Care Benefit, Special Child Care Benefit, and Jobs, Education and Training Child Care Fee Assistance.

The focus in this Chapter is the impact of the replacement of the additional forms of assistance with the costs of child care in place under the previous system with the Additional Child Care Subsidy. This section briefly describes the numbers of families that received the various forms of additional child care assistance under the old and new systems; further analysis of the transition from the old to the new system is provided in Chapter 7.

In 2017-18 there were 23,447 families that received SCCB, 5,559 families that received GCCB and 11,356 families that received transition to work (JETCCFA) during at least one week during 2017-18. In total, 40,362 families received one of the additional payments in 2017-18, which is 3.7 per cent of all families (1,091,549) that received a child care subsidy during the year. In 2018-19 there were 32,419 families that received Additional Child Care Subsidy during at least one week during 2018-19, which is 3.1 per cent of all families (1,041,692) that received a child care subsidy during the year. This means that there were 7,943 fewer families that received additional child care payments after the introduction of the Package.⁷¹

There were 5,159 families who received SCCB in the last week of June 2018 and, of these, 38 per cent were receiving ACCS in the first week of August 2018, 49 per cent were receiving CCS and 13 per cent were not in the child care system. There were 3,120 families who received GCCB in the last week of June 2018 and, of these, 78 per cent were receiving ACCS in the first week of August 2018, 8 per cent were receiving CCS and 15 per cent were not in the child care system. There were 4,005 families who received JETCCFA in the last week of June 2018 and, of these, 42 per cent were receiving ACCS in the first week of August 2018, 53 per cent were receiving CCS and 5 per cent were not in the child care system.

Our estimates from the 2017-18 administrative data are that the additional amount of support (on top of what would have been received under the standard CCB/CCR payment) provided under the GCCB program was $203.6 million, under the SCCB it was $108.6 million and under JETCCFA it was $30.4 million. This compares to the amount of additional support (on top of what would have been received under the standard CCS payment) for 2018-19 of $294.3 million.

4.2.8 Impact of program settings on affordability - summary

There are 4 components of the CCS that determine the amount of subsidy to which families are entitled: hourly rate caps; percentage rate of Child Care Subsidy; the annual cap; and approved hours as determined under the activity test. There is also additional government financial support for families and children who may face barriers in accessing affordable child care via the ACCS.

The relative size of the subsidies under the Child Care Benefit/Child Care Rebate systems and CCS depends on a range of factors including income, number of children using care, level of activity, number of hours of care used, hourly fee paid for services and type of care used.

A substantial minority of hours of care paid for are charged above the hourly rate cap. During the second half of 2019, across the period, in most weeks, the proportion of hours charged above the cap was between about 13 and 18 per cent,⁷² for Centre Based Day Care around 15-16 per cent of hours were charged above the cap, for Family Day Care around 20-23 per cent of hours were charged above the cap⁷³ and Outside School Hours Care had the lowest proportion of hours charged above the cap and much lower proportions being charged above the cap during school holiday weeks. While In Home Care comprises only a small proportion of total hours of child care used, a high proportion of hours are charged over the hourly rate cap (ranging from just under 40 per cent of hours to around 75 per cent of hours over the period since 1 July 2018).

Where the hourly fee is being charged above the cap, the average amount above the cap varies from 10.3 per cent for Centre Based Day Care and 11.3 per cent for Family Day Care to 17.4 per cent for In Home Care. At the 90^th percentile, the amount being charged in excess of the cap is substantial, being 23.3 per cent for Centre Based Day Care and up to 31.2 per cent for In Home Care.

While the majority of hours of care are not charged above the hourly rate cap, the cap does impact particularly families using In Home Care and families with higher incomes, with a youngest child using child care of under 3 years, using very short hours of care and those using child care services in capital cities or remote or very remote areas. For the majority of hours charged above the cap, the amount in excess of the cap is relatively small but there are a small proportion of hours that are charged well in excess of the hourly fee rate cap.

The subsidy taper rate, which reduces the amount of subsidies paid as income increases, has a substantial impact. Overall, 4.8 per cent of families have an income in the range over which the CCS rate reduces from 50-20 per cent and 3.7 per cent do not receive any subsidy due to their income being above the threshold at which the subsidy rate goes to zero. Very important to note is that there is a difference between the formal subsidy rate and the effective subsidy rate received by families. For example, for families with an income of up to $66,958, the formal subsidy rate is 85 per cent but the rate received is in fact only 75.3 per cent. This is for a range of reasons including the impact of the activity test, which means that some hours paid for are unsubsidised, and the annual cap among other factors.

The annual benefit cap impacts a small number of families with an income above $186,958 (14,667 families or 1.3 per cent of all families using child care). Amongst families with an income in excess of $186,958 and up to $351,247, 8.7 per cent were impacted by the annual benefit cap.

The changes to the approved hours of care and the associated activity test have had a significant impact on families. Overall, 13.3 per cent of hours paid for by families were unsubsidised, with just over half of families paying for at least one hour of unsubsidised care during the year. While most families that pay for at least one subsidised hour have only a small proportion of hours unsubsidised, there are some families that are charged for substantial numbers of unsubsidised hours. The highest proportion of hours that are unsubsidised are for high income families (in excess of $341,248 per annum). For families on an income of less than this, there are only small differences in the proportion of hours that are unsubsidised, being a bit under 10 per cent of hours.

4.3 Child care fees

The fees charged by child care services are an important determinant of the affordability of child care. Historically, child care costs have increased at a faster rate than CPI and, hence, have increased in real terms (Section 4.3.3). The July 2018 changes to the child care system were designed to put downward pressure on child care fees via the introduction of the hourly fee rate cap and the concept of a family co-contribution, so that families pay a portion of their child care fees.⁷⁴

4.3.1 The distribution of hourly child care fees

This section provides a summary of the distribution of hourly fees charged by services in Q4 2019 and how this varies according to type of care. Fees are reported at various points in the distribution of fees (p5, p10, p25, p50 (median), p75, p90, p95) and the average fee. The average fees for child care type combined (excluding In Home Care) is $9.78 per hour and is slightly higher in for-profit services ($10.05) than not-for-profit services ($9.30) (Table 32). The median hourly fee is similar to the average hourly fee, which is because the distribution of fees is not skewed. There is a little more variation between fees at the bottom end of the distribution and the top end of the distribution in not-for-profit services than in for-profit services. The average fees are highest in Family Day Care services ($10.69), slightly lower in Centre Based Day Care services ($10.34) and substantially lower in Outside School Hours Care services ($8.14). The range of hourly fees charged (5^th-95^th percentile) is smallest in Family Day Care services, followed by Centre Based Day Care services and largest in Outside School Hours Care services.

Notes: For In Home Care the hourly rate is reported at the family level. Records with zero fees or zero hours are excluded.

Source: DESE administrative data

As discussed in Section 4.2.2, while the majority of child hours are charged at rates below the hourly rate cap, a significant proportion of services are charging at least some children at rates that exceed the hourly rate cap. Table 33 shows the proportion of services with an average hourly fee above the hourly rate cap, by service type, along with the proportion of services where at least one child is charged an average fee across the quarter above the hourly rate cap. These approaches produce very different results, which is due to there being variation in the fees charged to families within a service. Using average hourly fees to compare to the hourly rate cap does not fully capture this possible variation, so underestimates the extent to which services are charging above this rate.

Notes: For In Home Care the hourly rate is calculated at the family level. Records with zero fees or zero hours are excluded.

Source: DESE administrative data

4.3.2 Trends in average hourly child care fees

This section provides an overview of the hourly fees charged by services over the period Q1 2017 to Q4 2019, and of the extent to which there is any evidence of a change in the trend in the hourly child care fee following the introduction of the Child Care Package in July 2018.

As discussed in Section 4.2.2, in the context of the hourly fee rate cap, the concept of an hourly fee is in most cases a post facto construction based on nominal session length and the session fee.⁷⁵ This means it is possible for hourly fees to increase in response to a nominal reduction in session length without the actual cost to parents increasing.

Across all services (excluding In Home Care where the cost is per family), and based on the formal session length, the cost of an average hour of care increased from $8.71 in Q1 2017 to $9.96 in Q4 2019 (Figure 35), an increase of 14.4 per cent. Inspection of Figure 35 shows that the average hourly fee being charged by Centre Based Day Care (CBDC) and Outside School Hours Care (OSHC) was increasing prior to the introduction of the Child Care Package in July 2018 and this has continued after the introduction of the Package. For Family Day Care there was a sharp increase in the hourly fee between Q2 and Q3 2018 following the introduction of the Child Care Package.

Figure 35: Quarterly average hourly fees, Centre Based Day Care, Family Day Care and Outside School Hours Care, Q1 2017 to Q4 2019

Source: DESE administrative data

The average hourly fee charged by In Home Care services over this period is shown in Figure 36. The average fee charged by In Home Care was increasing prior to the introduction of the Child Care Package and increased very substantially immediately following the changes from $18.93 per hour (on a family basis) in Q2 2018 to $29.08 per hour in the Q3 2018. This, in part, reflects the significant changes associated with the new In Home Care program and its alignment to the Child Care Package. These changes were expected to result in changes to the charging practices of the In Home Care services (see also Section 5.6).

Figure 36: Quarterly average hourly fees per family, In Home Care services, Q1 2017 to Q4 2019

Notes: In order to take into account the shift in In Home Care from charging on a per child to a per family level (see footnote 63), In Home Care fees prior to July 2018 are calculated by summing fees charged to individual children.

Source: DESE administrative data

Figure 37 shows the changes in the average hourly fee for the 12 months prior to the changes to the child care system (Q2 2017 to Q2 2018) and the 12 months following the changes to the child care system (Q2 2018 to Q2 2019). The increase in hourly fees for Family Day Care is apparent with a 0.6 per cent increase in the 12 months prior to the changes and a 19.9 per cent increase in the 12 months post the changes. For In Home Care there was a big increase in the family hourly fee in the 12 months prior to the changes (11.3 per cent) and a massive increase of 62.7 per cent following the changes. Across all services (excluding In Home Care) the average increase in fees in the 12 months prior to the changes was 3.7 per cent and in the 12 months following the changes the increase was 7.3 per cent.

The change in the average hourly fee charged by Centre Based Day Care and Outside School Hours Care is similar in the 12 months prior to the changes to the system and in the 12 months after the changes to the system, with a slightly higher percentage increase for Centre Based Day Care post the changes than before and a slightly lower percentage increase for Outside School Hours Care following the introduction of the Package relative to that prior.

Figure 37: Change in hourly fees 2017 to 2018 and 2018 to 2019, by service type

Notes: In order to take into account the shift in In Home Care from charging on a per child to a per family level (see footnote 63), In Home Care fees prior to July 2018 are calculated by summing fees charged to individual children.

Source: DESE administrative data

Figure 38 shows the increases over 2 periods, June 2017 to June 2018, and June 2018 to June 2019 by type of service provider. In both periods the overall increase in fees was higher for for-profit services relative to not-for-profit, although this did not hold for all service types. In particular, for-profit services in the Family Day Care sector had smaller increases in the 2017-18 period and much larger in the 2018-19 period than not-for-profit services. In the Outside School Hours Care sector, the increase in fees for not-for-profit providers was above that of for-profit providers in both time periods.

Figure 38: Annual percentage change in average hourly fee, by type of service and whether for-profit or not-for-profit, 2017 to 2018 and 2018 to 2019

Notes: Change in fees is June quarter to June quarter.

Source: DESE administrative data

The big increase in the average hourly fee being charged by for-profit Family Day Care providers led to a convergence of the hourly fee being charged by for-profit providers to that being charged by not-for-profit providers (Figure 39). Before July 2018, for-profit Family Day Care providers were charging a substantially lower per hour fee than were not-for-profit Family Day Care providers. After the changes, the hourly fee charged by for-profit Family Day Care providers increased to be the same as that being charged by not-for-profit providers. Post the shift to the new system, the hourly fee charged by for-profit and not-for-profit Family Day Care providers has increased at about the same rate.

Figure 39: Average hourly fee, Family Day Care, by whether provider is for-profit or not-for-profit, Q1 2017 to Q4 2019

Source: DESE administrative data

As documented in Chapter 9, a significant number of for-profit Family Day Care services have ceased operating since the beginning of 2017. Also as outlined in Chapter 9, this is in substantial part due to fraud and a range of non-compliance issues. Figure 40 shows the hourly fee charged by for-profit Family Day Care providers over the period Q1 2017 to Q4 2019 according to whether the service continued operation in 2018-19. There is very little difference in the hourly fee charged between services that ceased operating and those that continued to operate post June 2018. This demonstrates that the increase in the hourly fee being charged by for-profit Family Day Care services is not due to compositional change among Family Day Care services.

Figure 40: Hourly fee, by whether services continued into 2018-19, for-profit Family Day Care services, Q1 2017 to Q4 2019

Source: DESE administrative data

Table 33 provides further insights into the reason for the apparent big increase in the hourly rate being charged by for-profit Family Day Care providers. Between 2017-18 and 2018-19, while the per hour cost of care charged by for-profit Family Day Care providers increased by 22.2 per cent, the annual number of hours of care per child paid for by families using for-profit Family Day Care decreased by 23.3 per cent (from 1,104 to 847 hours per year). Among not-for-profit Family Day Care providers there was a much smaller increase in the per hour cost of care being charged for (increase of 5.9 per cent) and hours per child charged for decreased by 3.5 per cent.

The increase in the hourly rate being charged by for-profit Family Day Care providers appears to be due to a change to the basis on which many for-profit Family Day Care providers are charging families. This is consistent with the data from the SELCS Wave 2 (June-July 2019) (Chapter 5) that shows that 56.0 per cent of Family Day Care services charge on an hourly basis.

There are some differences across states/territories in the change in hourly fee charge and per child hours of care paid in the Family Day Care sector. There were increases in the hourly fee in all states/territories except for the Northern Territory, where there was a small fall in the hourly fee (1.2 per cent). There were smaller increases in the hourly fee charged in the Australian Capital Territory (5.2 per cent increase) and Tasmania (5.8 per cent increase). The largest increase in the hourly fee was in New South Wales (20.7 per cent) followed by Victoria (17.2 per cent increase). The states in which the hourly fee increased by the largest amount also were the states with the largest decrease in the number of hours of care used.

Source: DESE administrative data

4.3.3 Distribution of changes in fees

The above analysis has focused on changes in average fees across services. This section considers the question of whether there have been differences in the rate of change in the hourly child care fee across services. Of particular interest is the potential impact of the new hourly fee cap, both among services charging well below the cap, and the possibility that the introduction of the cap was interpreted by these services as a signal that they should be charging more, and the intended effect of this measure of reducing increases in hourly fees above the cap.

The analysis is restricted to Centre Based Day Care services, given the substantial changes in how Family Day Care services and In Home Care services were charging associated with the introduction of the Child Care Package. As the data is longitudinal, it relates only to those services operating across the period of the comparison, and hence does not take into account changes in the composition of services over the period as a result of entries and exits.

A challenge in considering this question is the time period over which change should be considered, and the extent to which focus is on the pattern of fee change since the introduction of the package or this pattern relative to that prior to the change. In this section, 4 measures are used:

• The first is the change in the average quarterly hourly fee between Q2 2017 and Q2 2018, and Q2 2018 and Q2 2019. This gives a measure of the immediate impact of the changes.
• The second measure is the change in the annual increase in hourly fees between 2017 and 2018, and 2018 and 2019. This measure is focused more on the trend in the change in hourly fees than the immediate impact of the introduction of the Child Care Package.
• The third measure is the change in fees between the December quarter at the end of one year and the following June quarter - that is, the change from December 2017 to June 2018 and the change from December 2018 to June 2019. This measure focuses of trends in fees unaffected by the actual changes that occurred with the introduction of the package.
• This is complemented by the fourth comparison, which considers the change between Q1 2017 to Q4 2017 and Q1 2019 to Q4 2019. This again excludes the short term impact associated with the introduction of the package.

In addition, a regression modelling approach is used to estimate whether there are distinctive changes in the pattern of fee increases for services at different points of the fee distribution following the introduction of the Child Care Package, in absolute terms and relative to what they were prior to the changes.

As has been detailed in Table 32 there is considerable variation in the fees charged by services, with, for example, in Q4 2019, the average hourly fee charged by a Centre Based Day Care service at the 95^th percentile point of the fees distribution of $13.48 compared to $7.60 for a service at the 5^th percentile. For this analysis, services have been grouped into 10 deciles based on their hourly fee.⁷⁶

Figure 41 shows the change in hourly fees between the June quarter (Q2) 2017 and Q2 2018 and between Q2 2018 and Q2 2019 for Centre Based Day Care services ranked by their decile of hourly fee in Q2 2017. This second change effectively picks up the impact of fee increases associated with the introduction of the package. Specifically, it shows that while in the period prior to the introduction of the package the dollar value of the increase in fees was relatively flat across services by their decile of fee, this changed with the introduction of the package. In this latter period, there was a very distinct pattern of higher increases for those services that had the lowest fees, and much smaller increases among higher fee services. This is emphasised in the chart, with the line showing the ratio of fee increases in the second period relative to those in the first.

Figure 41: Centre Based Day Care Services, ranked by decile of fee in Q2 2017, change in hourly fees between Q2 2017 and Q2 2018 and Q2 2018 and Q2 2019

Source: DESE administrative data

The additional analyses are focused more on the longer-term changes in the pattern of fee increases, rather than the immediate impact of the package - and suggest that this experience differs from the shorter term.⁷⁷

Figure 42 shows the change in annual average hourly fees between 2017 and 2018 and between 2018 and 2019 for Centre Based Day Care services, this time ranked by their decile of annual average hourly fee in 2017. The figure also shows the ratio of the change in the hourly fee in the second period relative to the first. A ratio of more than 100 indicates that the fee increase was higher between 2018 and 2019 than it was between 2017 and 2018. This data shows a pattern of decreasing increases for the higher fee deciles in the second period but, in this case, shows this as being consistent with the earlier period. As a consequence, the ratio of increases across the 2 periods is almost flat (with the exception of the highest fee decile where the increase is higher in the second period) - suggesting no change in the pattern of fee change for most of the distribution. This data is, however, still impacted by the changes at the time of the introduction of the package.

Figure 42: Centre Based Day Care Services, ranked by decile of fee in 2017, change in annual average hourly fee, 2017 to 2018 and 2018 to 2019

Source: DESE administrative data

To address this, Figure 43 and Figure 44 look at changes over 3 quarter periods that exclude the impact of the changes. Figure 43 shows the change in hourly fees between the December quarter (Q4) 2017 and the June quarter (Q2) 2018 and the December quarter (Q4) 2018 and the June quarter (Q2) 2019 for Centre Based Day Care services ranked by their decile of hourly fee in Q4 2017. The conclusion from this analysis is also that the pattern of changes in hourly fees by fee decile is similar post the Child Care Package to what it was prior to the changes to the child care system, and the growth in the second period was higher than in the first.

Figure 43: Centre Based Day Care services, ranked by decile of fee in Q4 2017, change in quarterly average hourly fee, Q4 2017 and Q2 2018 and Q2 2019

Source: DESE administrative data

Figure 44 presents changes in the average quarterly hourly fee between Q1 2017 and Q4 2017, and between Q1 2019 and Q4 2019. This shows a similar picture to Figure 43 but with an indication of a relatively higher ratio of growth for the upper deciles.

Figure 44: Centre Based Day Care services, ranked by decile of fee in Q1 2017, change in quarterly average hourly fee Q1 2017 to Q4 2017 and Q1 2019 to Q4 2019

Source: DESE administrative data

Given that there were some changes in the pattern of use of child care following the introduction of the Child Care Package, including session length, which affects the calculation of the hourly fee, as well as the potential for a range of other service characteristics to have an impact on price changes, a regression model of the extent to which the quarterly change in the hourly child care fees differs before and after the introduction of the package has been estimated. In this model, the dependent variable is the quarterly change in the hourly fees in dollar per hour terms and the explanatory variables include the time (measured quarterly), and the decile of service fee in Q1 2018 interacted with whether the quarter was before or after the introduction of the Child Care Package from July 2018. In addition, the average hours of care per child is controlled for, as is the size of the service in terms of child weeks of care in the quarter and the size of the provider, the service location and whether the service was for-profit. The model is estimated for the period Q2 2017 to Q4 2019, with change between Q2 2018 and Q3 2018 excluded.

In terms of the key question as to the pattern of fee increase across services ranked by their fee level in the post package period, the model suggests a differential pattern of an increase of some 4 cents per hour per quarter for services in deciles 1-6 and of 3 cents an hour for those in deciles 7-9, with decile 10 excluded due to the model structure. While these are statistically significant, their magnitude is very small. This suggests that the fee decile of the service makes relatively little contribution to the relative change in fees in the period following the introduction of the package.

This analysis suggests that, while there was a tendency for lower fee Centre Based Day Care services to increase their fees more rapidly at the point of transition to the CCS, possibly indicative in the short term of there being a 'benchmark effect', in the longer term the pattern of increase is relatively consistent across the fees distribution.

Notes: ^a change to quarter, excludes change from Q2 2018 to Q3 2018. OLS regression with robust standard errors. 
*, **, *** indicate that the underlying coefficient is significant at the 90 per cent, 95 per cent and 99 per cent confidence levels respectively.

Source: DESE administrative data

4.3.4 Trends in the costs of child care: Consumer Price Index (CPI) data

The history of the cost of child care as measured by the Australian Bureau of Statistics' Consumer Price Index is one of rapidly increasing prices (especially since the early 1990s) punctuated by strong price falls as Commonwealth governments have increased the generosity of payments or introduced new programs (Figure 45).

Interpreting these changes in the child care CPI requires an understanding of the methodology that the ABS uses to calculate price change for child care. The ABS methodology involves collecting gross child care prices and then subtracting government child care payments. Government child care payments are calculated through the use of customer profiles for a sample of households. The methodology takes into account payments that are made to families that reduce child care costs to families, but not when this assistance was provided through the tax system.

Specifically highlighted in Figure 45 are some of the major changes. The ABS report these changes as:

• a fall of 14.7 per cent in child care fees in the March quarter 1991. This was as a consequence of the introduction of Childcare Assistance in January of that year (effectively the extension of the 'Fee relief' that has been available in the community sector).
• a 5.1 per cent decrease in the September quarter 1994. This was 'largely due to the introduction of the Commonwealth Government Childcare Cash Rebate Scheme that came into effect on 1 July 1994' (ABS 6401.0, September 1994, p. 2).

Figure 45: ABS Child Care and All Groups CPI, March 1982 to March 2020

Source: ABS (various years). 'Consumer Price Index, Australia', ABS Catalogue No. 6401.0, ABS, Canberra.

• a fall of 15.1 per cent in the September quarter 2000. No detailed explanation of this is given by the ABS, in part as this release also encompassed the effect of the introduction of the GST. The change appears to reflect the impact of the introduction of the Child Care Benefit and the higher rates of assistance this provided.
• a fall in September 2001. ABS reported 'a fall in the cost of child care (-6.4 per cent) due to an increase in Commonwealth child care benefits' (ABS 6401.0, September 2001, p. 4).
• a fall of 33.4 per cent in September quarter 2007. The ABS reports this as resulting 'from a change in the eligibility criteria for the Child Care Tax Rebate (CCTR) that has brought it in-scope of the CPI this quarter and from the additional 10 per cent indexation of the Child Care Benefit (CCB) rates on top of the usual annual CPI indexation' (ABS 6401.0, September 2007, p. 1).⁷⁸
• a further fall of 22.9 per cent in the September quarter 2008. This is ascribed by the ABS to 'the increase in the Child Care Tax Rebate (CCTR) from 30 per cent to 50 per cent that was implemented as of 1 July 2008' (ABS 6401.0, September 2008, p. 5).

The ABS reported the introduction of the Child Care Package and the CCS as resulting in an 11.8 per cent decline in the cost of child care in September 2018: 'The fall in child care is due to the introduction of the CCS from 2 July 2018, which replaced the Child Care Rebate and Child Care Benefit' (ABS 6401.0, September 2018, p. 3).

The ABS CPI data suggests that child care prices have been adjusted continuously since June 2018, rather than there being a large jump at the beginning of the new calendar year. Over the period September 2018 to September 2019 the ABS Child Care CPI has increased by 7.0 per cent and the overall CPI increasing by 1.7 per cent. By March 2020 almost three-quarters (72.6 per cent) of the reduction in the child care CPI due to the Package had been lost.

Figure 46 shows the child care CPI (real child care costs) and child care CPI relative to male and female full-time adult ordinary time average earnings. This measure is clearly linked to affordability because the large majority of those using child care and paying child care fees have at least one parent in paid employment.

Figure 46: ABS Child Care CPI relative to male and female full-time adult ordinary time average earnings, March 1982 to December 2019

Notes: MFTAOTE - Male Full-time Adult Ordinary Time Earnings. FFTAOTE - Female Full-time Adult Ordinary Time Earnings.

Source: ABS (various years). 'Consumer Price Index, Australia', ABS Catalogue No. 6401.0, ABS, Canberra. ABS (various years). 'Average Weekly Earnings Australia', ABS Catalogue No. 6302.0. ABS, Canberra.

The real price index for child care was 152.3 in March 2020 compared with 162.4 in June 2018, just prior to the introduction of the Package and 142.6 in September 2018, just after it was introduced. While real net child care costs have increased substantially since 1982, relative to earnings they are no higher in March 2020 than they were in March 1982.

This is open to several interpretations. One is that the very large increases in government child care assistance over the period have had no impact on the actual proportion of earnings that parents need to pay for child care. Alternatively, it may be argued that the government assistance has largely been absorbed by quality improvements, including, for example, improved staff to child ratios and more qualified staff.

In addition, wages of child care workers have for many years been increasing at a faster rate than CPI. The ABS Survey of Employee Earnings and Hours conducted every 2 years provides data on earnings and hours for detailed occupational classifications. There are some challenges resulting from changes in occupational classifications with the shift from the Australian Standard Classification of Occupations (ASCO) to the Australian and New Zealand Standard Classification of Occupations (ANZSCO) in 2006. Over the period from 2006-18 the average week total cash earnings of full-time non-managerial adult employee child care workers increased by 45.3 per cent and average hourly total cash earnings increased by 47.4 per cent.⁷⁹ The increase in the wages of child care workers is substantially more than the 31.5 per cent increase in CPI over this period.⁸⁰ Because wages are a substantial proportion of the costs of providing child care (wages in 2018-19 were around 60 per cent of child care revenue and about two-thirds of costs) (Richardson, 2019) and because the ability to find costs savings in other areas is limited, it means that it is almost inevitable that child care costs will increase at a faster rate than CPI.

4.3.5 Child care costs - summary

The average hourly fees being charged by child care centres increased in the 12 months following the introduction of the Child Care Package, and for Centre Based Day Care and Outside School Hours Care, the change in the 12 months following the changes to the child care system were very similar to the increases in the 12 months prior to the changes to the child care system. While there was an apparent very large increase in the hourly fees charged by for-profit Family Day Care providers, this reflects a change in the charging practices of these services from charging per session to charging per hour of care used, with an increase in the hourly fee charged and a reduction in the number of hours paid for. When this is taken into account, there appears to be little change in the fees being paid by families using for-profit Family Day Care services. For In Home Care where the program was substantially changed there has been a very large increase of 62.7 per cent in the hourly fee being charged in the 12 months following the child care changes.

The Australian Bureau of Statistics CPI data shows child care prices have been adjusted continuously since June 2018, child care CPI has increased by 7.0 per cent and the overall CPI by 1.7 per cent. By March 2020 almost three-quarters of the reduction in the child care CPI due to the Package had been lost. Child care costs as a proportion of average earnings are no higher now than they were in 1982.

4.4 Parental perceptions of affordability

This section reports data on parental perceptions of the affordability of child care using the DESE/ORIMA cross-sectional surveys of parents.⁸¹ As detailed earlier, there have been 4 waves of the DESE/ORIMA parents' survey: the first in June 2018 just before the changes to the child care system, which provides a baseline, and the other 3 in November 2018, June 2019 and November 2019, after the introduction of the Package.

This section draws on a number of questions in these surveys that provide an insight into perceptions of affordability. The initial focus is on parents' level of agreement or disagreement with the statement 'The cost of child care is affordable' - which was asked in all waves of the survey.

4.4.1 Parental perceptions of affordability

Parental perspectives on the affordability of child care are diverse, although on balance negative. In November 2019, 22.5 per cent of parents with a reference child aged under 5 years 'strongly disagreed' with the statement that the cost of child care was affordable, with a further 32.2 per cent 'disagreeing'. In contrast, only 24.6 per cent of these parents 'agreed' with the statement, and just 3.8 per cent 'strongly agreed' (Figure 47). Noticeable in the distribution is the degree of polarisation with just 16.8 per cent expressing a neutral position - that of 'neither agreeing nor disagreeing'. This pattern is also seen for parents with an identified reference child aged 5-13 years, although they were more likely to agree or strongly agree that child care was affordable than those with a younger reference child. Of parents with a reference child aged 5-13 years, 15.3 per cent 'strongly disagreed' and 25.6 per cent 'disagreed' with the statement that child care was affordable, 20.2 per cent stated that they 'neither agree nor disagree', 32.4 per cent 'agreed', and 6.5 per cent 'agreed strongly'.

On balance:

• Parents with a younger child (aged 0-4 years) were more likely to disagree that child care was affordable - with 54.7 per cent disagreeing compared with 28.4 per cent agreeing.
• Perspectives of parents with a youngest child using care aged 5 years and over were almost equally balanced, with 38.9 per cent agreeing it was affordable, and 40.9 per cent disagreeing. However, those expressing disagreement were twice as likely to report their disagreement as 'strong disagreement' compared to those agreeing who reported this as 'strong agreement'.

Figure 47: Parents' agreement that child care is affordable, distribution, November 2019

Notes: Parents with a reference child who is in identifiable formal child care. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, November 2019

There was some increase in the balance of parents who agreed that child care is affordable between the June 2018 survey, conducted just before the changes took effect, and November 2019. Figure 48 shows the mean score of disagreement/agreement with the statement that child care is affordable with a value of -2 for strongly disagree, -1 for disagree, 0 for neither agree nor disagree, 1 for agree and 2 for strongly agree.

For parents with a reference child aged under 5 years there is a clear and statistically significant increase in the mean score of agreement between June 2018 and the subsequent surveys, although the average remains below zero (the neutral score of neither agreeing nor disagreeing) and there is a slight downward trend from November 2018 to November 2019, although this is not statistically significant. A similar pattern is shown by the data in responses by parents with an older reference child, and while the mean rating is below the neutral zero in all time periods, the extent is much less than that for those parents with a younger child.

Figure 48: Parents' agreement that child care is affordable, by child age group, mean rating, June 2018 to November 2019

Notes: Parents with a reference child who is in identifiable formal child care. Error bars on the chart show the 95 per cent confidence interval. Responses scored: 'Strongly agree': +2; 'Agree': +1; 'Neither agree nor disagree': 0; 'Disagree': -1; 'Strongly disagree': -2.

Source: DESE/ORIMA Parent Survey, June 2018 to November 2019.

The November 2019 survey data suggests that the balance of parents' agreement on the affordability of child care statement is most negative for those with a reference child under 2 years of age (-0.51), followed by a reference child aged 2-4 years.

By type of care it is clear, see Figure 49, that parents who have a child in Centre Based Day Care have the lowest level of agreement that child care is affordable, with a statistically significant lower agreement than those in either Family Day Care and Outside of School Hours Care, and a statistically significant mean rating below zero indicating a tendency to disagreement. There are no statistically significant differences among other types of care on affordability, and no statistically significant difference from zero, meaning neither agree nor disagree.

Figure 49: Parents' agreement that child care is affordable, by type of care, mean rating, June and November 2019 pooled sample

Notes: The June and November 2019 surveys have been pooled in order to reduce the sampling error. Parents with a reference child who is in identifiable formal child care. Error bars on the chart show the 95 per cent confidence interval. Responses scored: 'Strongly agree': +2; 'Agree': +1; 'Neither agree nor disagree': 0; 'Disagree': -1; 'Strongly disagree': -2.

Source: DESE/ORIMA Parent Survey, June 2018 to November 2019

Figure 50 presents the mean scores of agreement on the affordability of child care by family labour force type for June 2018 and November 2019. Considering, first, the November 2019 data, the highest negative average rating, -0.58, was recorded for couple families with both members employed full-time, with this being significantly different to all couple families, other than those with nil employment and all groups of single parents. None of the other differences, either between the different groups of single parents, or within couples, were significant at the 95 per cent confidence level.

With respect to changes over time, all groups, except for couples with no recorded employment, had higher levels of agreement with the statement that child care was affordable in November 2019 than in June 2018. For 4 of these groups the changes were statistically significant. These were single parents with part-time employment, single parents with no employment and couples with one employed full-time and one part-time employed, and those with just one member employed full-time.

Figure 50: Parents' agreement that child care is affordable, by parents' employment status, mean score, June 2018 and November 2019

Notes: Parents with a reference child who is in identifiable formal child care. Responses scored: 'Strongly agree': +2; 'Agree': +1; 'Neither agree nor disagree': 0; 'Disagree': -1; 'Strongly disagree': -2. Refer to Figure 10 for family labour force classification. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Survey June 2018 and November 2019

As noted in the introduction, and considered later in this chapter, the introduction of the Child Care Package was expected to have a range of diverse impacts on the affordability of child care, dependent on family income. The changes to the system were expected to reduce the level of subsidy provided to higher income parents and, all else being equal, thus to reduce affordability. For middle income parents the changes were expected to increase the level of subsidy, and for lower income parents, to increase the level of subsidy for those who met the new activity test.

Figure 51 shows the mean score of the affordability question by gross family income using the June 2018 and November 2019 data. Between June 2019 and November 2019 there was, on average, a perception of an improvement in the affordability of child care for those income groups below an income of $170,000 per annum. Specifically, for all categories of families the overall rating given to affordability was negative:

• The 6.6 per cent of families⁸² with a reported income of less than $30,000 per annum reported an improvement of 0.13 of a response category. This was not statistically significant.
• A large and statistically significant 0.40 of a response category gain was reported by the 22.5 per cent of families with reported gross incomes of $30,000 to $65,000.
• A lesser, but still marked and statistically significant, gain of 0.24 of a response category was reported by those with incomes of $65,000 to $125,000 who accounted for 54.9 per cent of families.
• A small and statistically insignificant increase of one tenth of a response category was reported by the 11.2 per cent of families with incomes of $125,000 to $170,000 per annum.
• In contrast, the other 3 income groups which account for just 5 per cent of the population of parents in the survey, reported a worsening of their perception of the affordability of child care, with this being around 0.35 of a response category for the 2 higher income ranges. None of these changes were statistically significant.

Figure 51: Parents' agreement that child care is affordable, by gross family income, mean score, June 2018 and November 2019

Notes: Parents with a reference child who is in identifiable formal child care. Responses scored: 'Strongly agree': +2; 'Agree': +1; 'Neither agree nor disagree': 0; 'Disagree': -1; 'Strongly disagree': -2. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey, June 2018 and November 2019

While this suggests that, on average, families in the income classifications up to $170,000 were more likely to report that child care was affordable (or in fact be less likely to report it was not affordable) in November 2019 than they did in June 2018, it is emphasised that this is, however, an average for these groups and not the experience of all families within the income classification.⁸³ The distribution of outcomes is considered further below.

4.4.2 Parents' assessment of financial impact of the Package and value for money

When asked in the June 2019 Parent Survey specifically about whether they were financially better off under the CCS compared to the old system,⁸⁴ almost half (46.1 per cent) of those parents with a child identified as being in care neither agreed nor disagreed, and slightly more agreed that they were better off (5.5 per cent strongly agreed and 25.0 per cent agreed) than disagreed (14.0 per cent disagreed and 9.5 per cent strongly disagreed). Consistent with the pattern of changes in self-assessed affordability by income group discussed above, those in lower income households, as shown in Figure 52, were more likely to agree that they were better off under the CCS compared to those from higher income households.

Views on the impact of the new subsidy are dispersed within each of the income bands, although the balance varies considerably. In the lowest income range, up to $30,000, the number of positive responses, 34.3 per cent, significantly outweighs the 12.5 per cent negative answers. This balance, although diminishing, continues up to the $65,000 to $125,000 bracket, where while 33.3 per cent still express agreement that they are better off, the proportion expressing disagreement increased to 19.2 per cent. These proportions are almost reversed in the $125,000-$170,000 grouping, with just 20.5 per cent expressing agreement, and 34.1 per cent disagreement. This pattern continues until, in the very high income group, that is families with an income of over $340,000 per year, 86.7 per cent report disagreement and just 2.0 per cent agreement.

Figure 52: Parents' agreement 'I am better off under the new CCS than under the old CCB/CCR', by gross family income, November 2019

Notes: Parents with a reference child who is in identifiable formal child care. Population restricted to those who has used paid child care prior to 2 July 2018.

Source: DESE/ORIMA Parent Survey, June 2018 and November 2019

Overall, single parents were more positive about being better off under the new arrangements, with 36.3 per cent agreeing that they were, as opposed to 17.2 per cent disagreeing. Couples were more evenly divided, with 29.3 per cent agreeing, and 25.0 per cent disagreeing.

A further question that provides some insight into the wider question of affordability was asked in the last 3 waves of the survey. This was whether parents considered the child care that they were using provided good value for money. As this question was not asked prior to the introduction of the Package, it is not possible to investigate whether the new arrangements have impacted this aspect. While, as shown in Figure 53, there was a slight decline in the mean score given by parents who were using child care to this question over the 3 surveys for which information is available, none of the differences between the survey waves were statistically significant. The level of the mean score indicates a level of agreement with the statement well above neutral, and tending towards agreement.

Figure 53: Parents' satisfaction with child care, providing good value for money, November 2018 to November 2019

Notes: Parents with a reference child who is in identifiable formal child care, refers to satisfaction of the reference care of the reference child. Responses scored: 'Strongly agree': +2; 'Agree': +1; 'Neither agree nor disagree': 0; 'Disagree': -1; 'Strongly disagree': -2. Error bars on the chart show the 95 per cent confidence interval.

Source: DESE/ORIMA Parent Survey November 2018 to November 2019

Child care costs as a barrier

In June 2019, those parents who did not use child care were asked to rate their agreement with statements relating to possible reasons for their not using child care. One of these was 'I did not use paid child care since July 2018 because it was difficult to meet the cost of child care'. Overall, 62.2 per cent of those not using child care who gave a response to this question agreed that one of the reasons they were not using child care was that it was difficult to meet the cost of care. Another 15.2 per cent disagreed with the statement, and 22.5 per cent said they neither agreed nor disagreed.⁸⁵ Some caution is required in interpreting these results, as many of the respondents gave multiple reasons, and it is not possible to identify from the survey the extent to which this can be seen as a barrier or just one of a number of factors that may limit their use of child care. More detailed analysis of the role of child care as a barrier to employment is undertaken in Chapter 8.

4.4.3 Parental perceptions of affordability - summary

On balance, parents have viewed affordability negatively, with this being more marked among those with younger children. While it is clear that many consider that they have benefited from the Package, others perceive a negative impact. Overall, the data collected from parents points again, on balance, to a positive outcome, with this being seen in terms of trends in the proportion of parents who consider child care is affordable; and in parents' perception of whether the introduction of the Child Care Package has resulted in them being better off. The data points to more positive outcomes for single parents, relative to couples, and for lower and middle income households, relative to those on higher incomes. For this latter group, the evidence points to declining affordability.

4.5 Modelled impact of changes to the child care system on affordability for families

The following sections report on the results of the microsimulation modelling of how the Child Care Package (CCS and ACCS) has impacted the amount of child care benefits received by families, relative to what would have been received under the former funding arrangements (CCB including Grandparent and Special, Child Care Rebate and JETCCFA) and the impact this had on net child care costs, and net child costs as a proportion of income, which are the key measures of affordability.

The modelling of affordability was undertaken on a financial year basis, given that income is required to be reconciled at the end of the financial year⁸⁶ and that some of the key parameters of the CCB/CCR and CCS/ACCS systems are based on use of child care and/or amount of subsidy received over the full financial year. Additionally, the use of whole year data provides a better estimate of actual child care usage by a family.

4.5.1 Overview of microsimulation methodology

Microsimulation models allow the amount of government benefits received by individual families and households and the amount of tax paid to be modelled and for the impacts of changes to the rules of the government benefit and taxation system on the amounts of benefits received or paid by individual households to be calculated. Microsimulation models are based on administrative or survey data that represents the underlying population of interest (termed 'the base file') and allow population level results to be produced, as well as results for different population subgroups, by income or other characteristics.

Choice of base file

As described in Chapter 1 and Section 4.1.2, this evaluation uses microsimulation models that are based on 2 sources of population base files. The first source is the Department of Education, Skills and Employment administrative data from the child care system. The second base file is the Australian Bureau of Statistics Survey of Income and Housing. For the analysis of the child care system administrative database file a purpose built microsimulation model of the CCB/CCR system and the CCS/ACCS has been built. This model incorporates all of the key components of the child care payment system. The analysis of the Survey of Income and Housing population base file was undertaken using the ANU Centre for Social Research and Methods microsimulation model PolicyMod.

• There are 2 options of base file for the administrative data: the 2017-18 (old world base file); and 2018-19 (new world base file). The analysis of affordability presented here has been undertaken using the 2018-19 base file. The reasons for this choice are:
  • The 2017-18 administrative database file does not include the detailed activity data required in order to model the amount of CCS that families would have been eligible for
  • Analysis of the files suggests there are significant limitations in the reporting of family income, with many of the estimates relating to previous year information.⁸⁷
• The 2018-19 administrative data allows, in principle, estimates of the impact of the changes on all families who were in the child care system in 2018-19. It does not include families who left the child care system between 2017-18 and 2018-19 due to the changes to the activity test⁸⁸ and high income families who left the child care system due to the greater level of means testing of the CCS.⁸⁹
• In order to test the robustness of the results to the choice of the 2018-19 base file, the impact of the Child Care Package has also been modelled using the 2017-18 base file, notwithstanding these known limitations. While there are differences in the modelled impact of the Child Care Package on affordability as modelled on the 2017-18 population base file relative to the 2018-19 population base file, the overall impact and the impacts according to income level are similar and the evaluation findings are robust to the choice of year population base file.

Use of reconciled income

The amount of child care payments made to families each fortnight is based on their estimated adjusted taxable income for the current financial year that they have provided to Centrelink. At the end of the financial year, once their taxable income is known and any adjustments made to arrive at their adjusted taxable income, then their actual child care payment entitlement for the year is assessed and any adjustment made, which can include an additional payment being made if they have received less than they are entitled to or a debt that must be repaid. In order to reduce the risk of families incurring debts and to limit the size of any child care payment debts that are incurred, under the CCS policy 5 per cent of their benefit is withheld and paid after the annual reconciliation process.

Because the process of submitting and assessing tax returns can take some time, reconciled income is available for about three-quarters of families. We used reconciled income when available and if not available the best available unreconciled income variable is used in the modelling.

The modelling task

As indicated in the introduction, the modelling task is that of a first round static comparison of the impact of the different subsidy arrangements that existed under the former CCB/CCR structure and that which applies under the Package. As such the modelling:

• does not take account of any changes in labour force participation and child care use as a result of the Package
• does not take account of any changes in child care costs.

The rationale for this approach is that the focus of the analysis is on the impact of the funding arrangements and that attempting to capture any of the dynamics associated with the above 2 effects is problematic. As explored in Chapter 8, not only are net changes in labour very small, but there are quite diverse changes, with some families increasing their reported level of participation and others decreasing. Attempting to ascribe these experiences to the base file brings with it a large risk of the results being as much a reflection of the adjustment process as the actual changes in the subsidy arrangements. Similarly, as seen in Chapter 6, not only does the immediate transition analysis not point to any major shift in participation but also there is a strong child age gradient to child care usage that makes the measurement of changes in usage in a longitudinal sense difficult to ascertain. Similarly, any attempt to take account of changing child care fees requires the construction of a counterfactual of how fees would have changed in the absence of the introduction of the Package. As discussed in Section 4.3, there is no clear pattern of change in fees associated with the Package, rather a diverse set of changes have been recorded across sectors, locations and types of providers.

Benchmarking expenditure

An important test of the performance of the modelling of the child care payments is to compare the total modelled expenditure with the actual expenditure reported on the child care administrative data file and with total expenditure as reported in the Portfolio Budget Statements.

The total modelled expenditure using reconciled income data is $7,682 million, which is 99.4 per cent of estimated actual expenditure of $7,725 million reported in the Departmental Portfolio Budget Statement. The expenditure on CCS/ACCS on the administrative data file, which reflects the actual pre-reconciliation entitlement, is $7,731 million (Table 36).

Sources: ^a DESE/Services Australia child care and payment system administrative data; ^b Portfolio Budget Statements 2019-20 Education and Training Portfolio. Commonwealth of Australia, Canberra.

Figure 54 reports the actual and modelled total amount of CCS received by each income vigintile. There are no systematic differences between actual and modelled amounts of benefits received by income vigintile suggesting that at an aggregate level the modelled amounts of CCS are not substantially upward or downward biased for any of the income groups.

Figure 54: Actual and modelled expenditure on the CCS, by income vigintile, 2018-19

Notes: Modelled expenditure is based on the unreconciled income as reported to Centrelink. See Table 39 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file

Figure 55: Families, distribution of absolute difference between modelled and actual annual CCS, 2018-19

Notes: Modelled CSS is based on the unreconciled income as reported to Centrelink.

Source: Evaluation modelling using 2018-19 administrative database file

The absolute difference between modelled and actual annual CCS is shown in Figure 55. It is apparent that for the majority of families, the difference in dollar terms is very small with 66.9 per cent within $10 and 73.7 per cent within $20. Examination of the distribution of the absolute percentage difference between modelled and actual CCS shows that for 70.7 per cent of families the difference is zero or very close to zero, 90.2 per cent of modelled CCS is within 2 per cent of actual CCS and 95.3 per cent is within 5 per cent (Figure 56).

Figure 56: Families, distribution of percentage difference between modelled and actual annual CCS, 2018-19

Notes: Modelled CCS is based on the unreconciled income as reported to Centrelink.

Source: Evaluation modelling using 2018-19 administrative database file

4.5.2 How the changes impact families

Before considering the detailed modelling results, it is useful to examine how the patterns of differences between the subsidy outcomes under the old CCB/CCR and the new CCS/ACCS systems relate to changes in family circumstances. This is considered below through a number of cameos that have been selected to demonstrate some of the different relative outcomes that can be experienced.

Cameo examples

This section uses some cameo family examples to illustrate the impact of the Child Care Package on the amount of child care benefits received as the number of hours of care used varies, the family income increases and the hourly fee paid increases. All cameos are for Centre Based Day Care and assume hours per week are indicative of annual day care use.

Cameo families for hours of care used

For each scenario the difference in benefits is modelled for hours of care over the range of 1 to 45 hours per week (per child). For reasons of simplicity, it is assumed that in families with multiple children in child care, the pattern and numbers of hours of care used by each child is the same. The child care fee paid is $10 per hour.

Figure 57 shows the impact of the Child Care Package on the amount of benefit received by each cameo family as the hours of care paid for increases. It is clear that the relationship between the number of hours of care paid for and the impact of the child care changes on the amount of benefits received is complex and depends on family income and hours of approved activity.

Specifically, the cameos show:

• For the single parent with a low income from income support (Cameo 1), they obtain a gain under CCS that increases in a linear fashion as hours of care increase. At 20 hours of care per week they are $52.40 per week better off.
• For the couple with both working full-time and a little above average income (for child care using population) (Cameo 2), they obtain a gain under CCS that increases as number of hours of care increases and the gains increase at a faster rate from about 33 hours of care per week.
• For the couple with one working full-time and one part-time and an average income (Cameo 3), they gain under CCS for all hours of care up to 42 hours per week. The gain reaches a maximum at 36 hours of care per week and then starts to decline and they are worse off under CCS for 42 hours or more of care per week.
• For the very high income family with one parent working full-time and the other part-time, they are worse off under CCS compared to the previous CCB/CCR system and the amount they are worse off increases to reach a maximum of $298.38 per week at 30 hours of care per week and then they continue to be worse off by this amount up to 45 hours of care per week.

Figure 57: Modelled impact of Child Care Package on child care payments received, by hours of care paid for per week, cameo families 1 to 4, 2018-19

Notes: SP - Single parent; CPL - couple parent family; 'act hrs/wk' - activity hours per week; 1 under 5 - one child using care under 5 years of age; 2 under 5 - 2 children using care under 5 years of age.

Source: Derived using ANU developed microsimulation model of the child care system

Cameo families for family income

• For the single parent whose income increases as she transitions from full-time education into work (Cameo 5), she receives more under CCS, and the additional amount increases to reach a maximum at an income of around $70,000 (Figure 58). As her income increases beyond this the amount of additional child care subsidy received under CCS declines, and for incomes from around $180,000 to around $250,000 she receives the same amount under the new and old system. As her income increases beyond $250,000, she is worse off under CCS.
• For the couple both working full-time and using long hours of paid care (Cameo 6), they are better off under CCS for incomes up to about $280,000. The amount they are better off is similar for incomes up to about $250,000 and then it starts to fall very gradually. For incomes in excess of about $280,000 they are worse off under CCS, and the amount they are worse off increases until an income of about $360,000 is reached.

Figure 58: Modelled impact of Child Care Package on child care payments received, by family income, cameo families 5 and 6, 2018-19

Notes: SP -Single parent; CPL- couple parent family; 'act hrs/wk' - activity hours per week. 1 under 5 - one child using care under 5 years of age; 2 under 5 - 2 children using care under 5 years of age.

Source: Derived using ANU developed microsimulation model of the child care system

Cameo family for hourly fee

Cameo 7 illustrates how the net gain varies as the hourly fee varies. For the slightly above average income couple earning $110,000 per annum, their gain under CCS increases as the hourly fee increases to reach its maximum at the relevant hourly fee rate cap ($11.77) (Figure 59). The gain then decreases as the hourly fee increases, and for increases in the hourly fee in excess of $14 per hour, the gain under CCS remains constant.

Figure 59: Modelled impact of Child Care Package on child care payments received, by hourly fee paid, cameo family 7, 2018-19

Source: Derived using ANU developed microsimulation model of the child care system

4.5.3 Overall impact of the Child Care Package on affordability

This section presents the results of the microsimulation modelling of the impact of the child care changes on affordability using the 2018-19 administrative data population base file.

4.5.4 Comparison of impacts on affordability using the 2017-18 and 2018-19 administrative data

For the reasons outlined above there are likely to be differences in the estimates of the impacts of the changes on affordability between the modelling based on the 2017-18 and 2018-19 administrative data. This section reports on the overall estimates of the impact of the changes on affordability and how the impacts differ by income level using the 2 administrative database files.

Table 37 shows the actual fees charged, adjusted taxable income, modelled benefits, net cost of child care and net cost of child care as a percentage of income under the CCB/CCR (2017-18) and CCS (2018-19) policies. Across all families using the child care system, the modelling estimates that average child care subsidies would have been $6,305 under the CCB/CCR policy and $6,786 per annum under the CCS policy, which is an increase of $481 or 7.6 per cent higher under CCS than under the CCB/CCR policy. This results in the net cost of child care falling from $4,875 to $4,394 per annum and the net child care costs as a percentage of gross family income falling from 5.2 per cent to 4.1 per cent.

The mean increase in benefits and reduction in child costs is greater than the median change. Given that the amount of child care subsidies were increased very substantially, the median arguably provides a better indication of the impact of the Child Care Package on the typical family. Median benefits under the CCB/CCR system would have been $4,892 per annum and under the CCS system were slightly lower at $4,807. While median benefits fell slightly, the median net cost is lower under the CCS system than it would have been under the CCB/CCR system (as the median total cost of child care is lower than the mean), falling from $2,957 per annum to $2,507 per annum and as a percentage of gross family income from 3.0 per cent to 2.7 per cent. The fall in net costs of child care is greater at the 75^th percentile (reduction of $741 per annum) than at the 25^th percentile (reduction of $103 per annum). This distribution is considered in more detail below.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

It is estimated that total government expenditure on child care payments would have been $7,229 million under the old CCB/CCR system, thus the modelled increase in expenditure due to the CCS changes is $453 million per annum, which is an increase of 6.3 per cent.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Net impact across the population

In terms of the distribution of outcomes, the modelling suggests that 29.2 per cent of, or about 323,000, families receive a lower subsidy under the CCS than they would have received than under CCB/CCR, 8.6 per cent of, or about 95,000 families would have had the same net cost of child care under both policies,⁹⁰ and 62.2 per cent of families, that is about 686,000 families, received more child care subsidy (Table 39).

For this majority of families who receive a higher subsidy under the Child Care Package, the mean net cost of child care falls from 6.7 to 4.5 per cent and the median net costs falls from 4.4 to 3.2 per cent. Those who received less subsidy have much higher incomes than those who receive more subsidy (mean income of $177,240 compared with $95,848 per annum). Those who were unaffected had a mean adjusted taxable income of $170,406 per annum.

For those who received less from CCS than they would have under CCB/CCR, the mean net cost of child care increases from 2.9 to 4.0 per cent of income and the median costs increase from 1.5 to 2.1 per cent (Table 39).

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

4.5.5 Impacts of child care policy change by income level

This section provides a more detailed analysis of the impact of the child care policy changes on the amount of child payment received and the costs of child care to families by income level. The analysis is presented for each 5 per cent of the gross family income distribution (income vigintiles).

Figure 60 shows the median modelled amounts of child care subsidies received under CCB/CCR (old policy settings) and under CCS (new policy settings) by income level. The figures also show the modelled subsidy as a percentage of fees paid (subsidy rate). The higher the subsidy rate the lower the proportion of fees that families pay.

The median benefits are higher under CCS than CCB/CCR up to and including the 14^th income vigintile (a gross family income of up to $157,335 per annum). For the 15^th income vigintile there is very little difference in the amount received under CCS as compared to CCB/CCR, and for the 16^th income vigintile upwards the amount received under CCS is lower than that received under CCB/CCR, and the difference increases with income. For the 20^th income vigintile (an income of $308,189 or more), the median amount of CCS received is zero compared to the $1,365 that would have been received under CCB/CCR. The median subsidy expressed as a percentage of fees is higher under CCS than under CCB/CCR for incomes up to income vigintile 14. The subsidy percentage under CCS is fairly stable for income vigintiles 1-4 (around 83 per cent) and then starts to fall as income increases. For the highest income vigintile the median subsidy percentage under CCB/CCR is 50 per cent compared to zero under CCS.

Figure 61 shows the mean child care subsidies and subsidy percentages modelled under CCS and CCB/CCR. The mean benefits under CCS are higher further up the income distribution than median benefits, with the mean CCS being higher up to and including income vigintile 15. There is virtually no difference between the amount of subsidy received under CCS and CCB/CCR for income vigintiles 16, 17 and 18. The mean amount of CCS received is lower than CCB/CCR for income vigintile 19 and is substantially lower for income vigintile 20 ($790 compared to $3,698).

The conclusions that are drawn from consideration of the mean child care subsidies are similar to those drawn from consideration of the median child care subsidies, although the median subsidy percentages under CCS are substantially higher than the median subsidy percentages under CCB/CCR up to the 14^th income vigintile.

Figure 60: Median child care subsidies and subsidy rate under CCB/CCR policy and CCS policy, by family gross income vigintile, 2018-19

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Figure 61: Mean child care subsidies and subsidy rate under CCB/CCR policy and CCS policy, by family gross income vigintile, 2018-19

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Figure 62 shows the difference in median child care subsidies and difference in subsidy percentage under CCS compared to under CCB/CCR by income vigintile and Figure 63 shows the mean values in order to highlight the impact of the Child Care Package. The difference in both the median and mean values shows that there are gains in the amount of child care subsidies received under CCS well up the income distribution and it is only for the highest 2 income vigintiles that the amount of CCS received is lower than what would have been received under CCB/CCR. This is reflected in the subsidy rate with higher subsidies well up the income distribution. The mean subsidy rate is affected by outliers and so on balance our judgement is that the median provides the best indication.

Figure 62: Difference in median child care subsidies and child care subsidy percentage under CCS and CCB/CCR policies, by family gross income vigintile, 2018-19

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Figure 63: Difference in mean child care subsidies and child care subsidy percentage under CCS and CCB/CCR policies, by family gross income vigintile, 2018-19

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Figure 64 shows the ratio of mean and median modelled CCS compared to CCB/CCR by income vigintile. For the lowest income vigintile mean, benefits under CCS are 109.1 per cent of the benefit that would have been received under CCB/CCR. It reaches a maximum of 116.3 per cent for income vigintile 6 and then remains above 110 per cent up to and including income vigintile 14. The fall in benefits is very substantial for the highest income vigintile, with mean benefits under CCS being 21.4 per cent of the benefit that would have been received under the CCB/CCR policy settings.

Figure 64: Child care subsidies under CCS relative to child care subsidies under CCB/CCR, mean and median, by family gross income vigintile, 2018-19

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Child care costs as a proportion of gross family income

Reflecting the analysis presented in Figure 60, median net child care costs as a proportion of family gross income are lower under the new CCS policy relative to CCB/CCR policy for all income vigintiles up to and including income vigintile 14 ($145,226-<$157,335), with effectively no difference for vigintile 15. They are then higher under the new policy settings than they would have been under the old policy settings from vigintile 16 ($170,948-<$187,648) (Figure 65). The difference in median costs is largest for the lowest income vigintile (1.8 percentage points lower), is 1.4 percentage points lower for vigintile 2, and declined to be 0.1 percentage points lower for vigintile 14. The highest income vigintile ($308,189 plus) median cost increased from 0.6 per cent of income to 1.0 per cent of income under the new policy settings.

Figure 65: Median net child care costs as a proportion of gross family income under CCB/CCR and CCS and change in net costs as a percentage of gross family income, by family gross income vigintile, 2018-19

Notes: See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

This focus on the median impact does, however, not fully reflect the range of outcomes across families using child care. The distribution of outcomes is presented in Figure 66, with some of the key moments shown in Table 37. Figure 66 plots the distribution of net child care costs as a percentage of gross family income by income vigintile. In the figure, the bars show the p25 to p75 interquartile range, along with the median, while the whiskers represent p5 and p95. Several points can be taken from the figure. First, consistent with the biggest fall in child care costs, is for families that experience higher net child care costs under the CCB/CCR policy. For example, for the fourth income vigintile the median net cost falls from 3.8 per cent to 2.8 per cent under CCS and for families at the 75^th percentile the net cost falls from 8.6 per cent to 6.0 per cent and for the 95^th percentile it falls from 22.7 per cent to 14.5 per cent.

Figure 66: Distribution of net child care costs as a proportion of gross family income, CCB/CCR and CCS policies, by family gross income vigintile, 2018-19

Notes: Whiskers show the net child care costs at the 5^th and 95^th percentiles. See Table 40 for the income ranges that apply to each income vigintile.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

The differences in the impact of the policy at different points in the net cost distribution (conditional on income) are explored further in Figure 67, which shows the cumulative density function of change in net child care costs (measured as a percentage of income) by income quintile. The cumulative density function shows the proportion of families in the income quintile whose net child care costs are reduced by at least the particular reduction in net costs. For example, for income quintile one (lowest income quintile) 12.8 per cent had a reduction in net costs of 8 percentage points or greater and 43.7 per cent had a reduction of 2 percentage points or greater.

Almost one-quarter (73.3 per cent) of the lowest income quintile had lower net child care costs as a result of the Child Care Package, and 8 in 10 of the second and third income quintiles had lower net costs (80.7 and 81.3 per cent respectively). For the fourth income quintile 62.3 per cent had lower costs and for the fifth quintile only a minority had lower net costs (12.8 per cent). The number of families with lower net child care costs is highest for the second and third income quintiles.

Figure 67: Cumulative density function of change in net child care costs as a proportion of income, by family gross income quintile, 2018-19

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

4.5.6 Impact of the Child Care Package by family characteristics

This section describes the impact of the change to the child care system on net costs by a range of family characteristics. The family characteristics considered are:

• family type (single parent, couple parent)
• total number of children using child care during 2018-19
• age of youngest child using child care during 2018-19
• family level approved activity level that is the activity used to assess eligibility for number of hours of subsidised care
• income support and family payment status of the family (whether received full rate income support payment, part rate income support payment, FTB but not income support, or received neither FTB nor income support).⁹¹

Regression modelling, reported in Section 4.5.10, is used to further explore the relationship between a range of these characteristics and the impact of the Child Care Package on affordability. The regression modelling allows an assessment of the independent contribution of these and other family characteristics and the nature of child care used to changes in affordability.

Table 41 shows the median and mean net costs of child care as a percentage of gross family income and the median and median change in child care subsidies according to family type. For single parents, the median costs of child care as a percentage of income falls from 4.1 per cent under the old system to 3.1 per cent under the new system due to an increase in annual child care benefit received of $297 (Table 40). For couple parents the median costs also fell but by a smaller amount from 2.8 to 2.6 per cent of income due to an increase in benefit of $133 per annum. The mean reduction in child care costs is greater for single parents, falling from 8.1 to 5.7 per cent.

While there is a decrease in the median and mean net cost of child care under the new system for all groups of families, when grouped by the number of children in care, there is a distinct pattern of the fall in costs increasing as the number of children increases. For families with one child using child care over the year, the median net cost of child care as a percentage of gross family income falls from 2.2 per cent under the old system to 2.0 per cent under the new system. For families with 5 or more children, the net median costs fall from 12.3 to 9.2 per cent of gross family income, and for these families the median increase in child care benefits is $1,464 and the average increase is $3,291 per annum. While there are only 4,261 families with 5 or more children using child care in the year 2018-19, for these families the increase in subsidies and reduction in child care cost is substantial.

The biggest increase in subsidies and reduction in net child care costs are for families with a youngest child aged under 2 years using child care (median cost falls from 4.9 to 4.2 per cent of gross family income), followed by a youngest child aged 2 to under 5 years using child care. There is little change in net costs for families with a youngest child using child care aged 5 to less than 6 years and a very slight increase for families with a youngest child using care aged 6 years or older. The net costs for families with a youngest child using child care aged 6 years or older is quite low (0.7 per cent of gross family income under CCS).

In terms of family activity, for single parent families the biggest increase in subsidies is for those with full-time activity (median increase of $438 per annum and a mean increase of $1,161 per annum), followed by those with part-time activity (median increase $370 and mean increase of $876 per annum). Single parents with low levels of activity, while still showing a gain, have much lower increases in subsidies (median increase of $100 and a mean increase of $268 per annum). The reduction in median net costs as a percentage of gross income for these single parents is largest for those with part-time activity, where it falls from 4.5 to 3.3 per cent of income followed by full-time activity which falls from 4.2 to 3.2 per cent.

For couple parent families, there is less difference in the impact of the child care changes on the net costs of child care as a percentage of income, with small improvements for all activity groups. While median and average costs fall as a percentage of income for all activity groups, mean benefits fall only slightly by $11 per annum for couple families with one parent having low activity and the other full-time activity. The biggest increase in benefits is for couple families in which both parents have full-time activity.

For both single parent and couple parent families, the biggest reduction in child care costs as a percentage of income is for those receiving full-rate income support. For single parents receiving no FTB (high income), the median cost of child care increases very slightly, and for couple families not in receipt of FTB, there is a very slight fall in the net costs of child care from 2.7 to 2.6 per cent of income under the new child care system.

Notes: ^a Low includes zero and less than 10 hours per week; part-time is 10 to under 34 hours per week, full-time is 35 hours or more a week.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Table 42 shows the proportion of families that are worse off, unaffected or better off under CCS than CCB/CCR by family characteristics. Single parents are substantially more likely to be better off under CCS than CCB/CCR (72.6 per cent) than are couple parent families (59.6 per cent). There is relatively little difference in the proportion of families that are worse off or better off according to the number of children using child care, with the exception of the small proportion of families with 5 or more children using child care, who are somewhat more likely to be better off than families with one to 4 children using child care.

In terms of the age of the youngest child using child care, those with a child under 2 years of age have the highest proportion better off (69.9 per cent) and the lowest proportion worse off (23.0 per cent) under CCS. This compares to those with a youngest child using child care who is 6 years or older of whom 47.2 per cent are better off under CCS and 41.5 per cent are worse off. Considering the pattern of better off and worse off by family activity status, single parents with full-time activity are the most likely to be better off under CCS (76.5 per cent) and couple parent families with missing activity information are the least likely to be better off under CCS (41.5 per cent). The higher the level of family activity, the higher the proportion of families that are better off and the lower the proportion of families that are worse off following the Child Care Package.

Notes: ^a Low includes zero and less than 10 hours per week; part-time is 10 to under 34 hours per week, full-time is 35 hours or more a week.

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

4.5.7 Impact of the Child Care Package by type and amount of care used

An important dimension in which the impacts of the changes to the child care system on affordability may have varied is type of care used and whether the care is being provided by a for-profit or not-for-profit service.

Service type and sector

Figure 68 and Table 43 detail the impact of the child care changes on median affordability by the most common child care type used during the year.⁹² Again, it is noted here that, notwithstanding the earlier discussion on changes in the hourly fees charged by services, this modelling is based on the fees and patterns of child care use as recorded in 2018-19, and relate only to the relative subsidies under the CCS and the CCB/CCR.

For families for whom the most common type of child care used during the year is Centre Based Day Care, there were relatively small improvements in affordability for both for-profit and not-for-profit services. The median net cost for families whose main type of care was for-profit Centre Based Day Care fell from 4.5 to 4.0 per cent of gross family income as a result of the changes to the system, and for families using not-for-profit Centre Based Day Care the net costs are reduced from 4.1 to 3.6 per cent of income by the changes.

The changes to the child care system as modelled resulted in a substantial improvement in affordability for families whose main type of care was for-profit Family Day Care (5.7-4.3 per cent of gross family income), and a smaller improvement in affordability for families whose main type of care was not-for-profit Family Day Care (3.0-2.5 per cent of income).

There was a substantial fall in affordability for families whose main type of care was for-profit In Home Care (increased from 2.8 to 5.5 per cent of gross family income as a result of the changes).

Figure 68: Median net child care costs as a proportion of gross family income, CCB/CCR and CCS policies, by type of care used and whether for-profit or not-for-profit, 2018-19

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

Hours of care used

Figure 69 shows the median net costs of child care and subsidy rate under the CCB/CCR and CCS policies by per child number of hours of care paid (expressed in weekly terms). As expected, the net cost of child care as a percentage of income increases as the number of hours of care increases. The net costs of child care are lower under CCS than CCB/CCR for per child hours of care 6-10 hours per week or higher, and the percentage point reduction in the net costs of child care increases as the number of hours of care paid for increases. For families paying for 46-50 hours of care per week, the median net cost falls from 10.9 per cent under CCB/CCR to 7.6 per cent under CCS. Correspondingly, the subsidy rate is lower for all hours from 6-10 hours up under CCS and the difference increases for care paid for of 41-45 hours per week and higher.

Figure 69: Median net child care costs as a proportion of gross family income and median subsidy rate, CCB/CCR and CCS policies, by per child hours of care paid for, 2018-19

Source: Evaluation modelling using 2018-19 administrative database file assuming constant 2018-19 child care costs and usage

The proportion of families that the Child Care Package had a positive impact on increases as the per child hours of care paid for increases from 46.5 per cent for those paying for 1-5 hours per child per week to 92.1 per cent of families paying for 51 or more hours care per child per week (Table 44). There is little difference in the proportion of families positively impacted by the Child Care Package according to whether the most common type of care used by the family is for-profit or not-for-profit Centre Based Day Care. Families using Family Day Care as their most common form of care are somewhat more likely to be positively affected than families using other types of care, and the proportion of families positively affected is higher for those using for-profit Family Day Care (77.5 per cent) than those using not-for-profit Family Day Care (71.3 per cent) as their most common type of care. There is a big difference between for-profit and not-for-profit In Home care with over half of families using not-for-profit In Home Care experiencing a positive impact as compared to just 27.6 per cent of families using a for-profit service.