Prime Minister Scott Morrison has announced a lifesaver for the childcare industry, which has been warning of ruin as parents withdraw their children.
Mr Morrison said childcare would now be free across the country's 13,000 childcare centres.
Education Minister Dan Tehan said from Sunday night, the current childcare system would be "turned off" and a new, free system would begin.
The government will now pay childcare centres 50 per cent of the fees they were getting on March 2, to a cap. The parent fees have been scrapped, saving parents hundreds of dollars a week.
That would leave centres operating on half their previous income, but the government will also substantially subsidise wages on top. Childcare centres that have seen a 30 per cent drop in revenue can access the new JobKeeper scheme, under which the government will pay $1500 a fortnight for every employee, including part-timers and casuals.
Mr Tehan said the funding for childcare, including the JobKeeper wage subsidy, amounted to $1.6 billion.
To get the money, centres must remain open and provide care for children of parents who needed it, he said.
"So the hope is that now all parents who need it will get the care they want and those who have sought to disengage from the childcare sector will re-engage with the sector," Mr Tehan said.
Jillian Schedneck, who has two children in childcare, Celia, 4, and Eva, 2, said the announcement was a big relief.
As an ANU staff member, she is now working from home, but with her husband in the private sector he has less job security.
They had been worried childcare would close altogether, with Celia already at home half the time since her ACT government preschool shifted to teacher-only.
"Having Eva at home, too, would make it really difficult to continue my job," she said.
Andy Botham is in a similar position, with a four-year-old and two-year-old in childcare.
He welcomed the news, saying he and his partner, one at the university and the other a public servant, had both been asked to work from home. Hugo is part-time in preschool, but with the switch to teacher-only, has been at home on days he would ordinarily be at school.
"We were torn," he said. "Do you withdraw the kids but continue to pay the fees to support the centre? It would protect the jobs of the educators, but if you did that, we would not be able to work from home which is what we have been instructed to do by our employers."
YWCA Canberra chief executive Frances Crimmins said most centres had lost 50 to 70 per cent of their children and the industry had been facing ruin before Thursday's announcement.
But she said the scheme should work to keep centres afloat.
"For parents and carers, this is essential. For services, we will do our utmost to work within what we've been given," she said.
She believed the cap for the government payment was $11.98 an hour for each child, and for some centres with expensive rent that could prove a problem. Some small centres could also have a cashflow issue, given the wage subsidy won't start flowing till May.
Ms Crimmins said parents who could no longer afford childcare because they had lost their jobs might now return. But she did not expect an overwhelming influx of children back into the system because other parents had removed children for safety and because they were working from home.
When they announced the scheme, Messrs Morrison and Tehan said centres would prioritise parents who were working and could not look after their children safely at home and vulnerable children who needed continuity of care. The aim was to ensure parents in essential industries could continue to work.
"There is a clear priority list that we want centres to take into account," Mr Tehan said. "The most important of those are those essential workers and the vulnerable children."
But he later clarified that the scheme was open to all parents, not only parents in essential industries, but those working from home or studying or unemployed. If the childcare centre had space it could also sign up new children, he said.
"Obviously preference has been given to those who are currently working and using childcare for those children who are vulnerable and those who already have enrolments," he said. "But where we can help and assist, others who now need childcare to help us fight the pandemic, then we'll be doing what we can to try and find places for those families."
University Preschool and Child Care Centre director Helen Chan said the centre was still trying to work out the full implications, including whether the centre will be funded for children who remain enrolled or re-enrol but don't attend.
"We're all just trying to get our heads around it," she said. "But it's fantastic news for families. It will be a big relief for families so that's a positive."
Some parents had also been forced to withdraw their children after losing their jobs and not all had been able to continue paying their fees.
The centre was down to only about 30 per cent attendance, she said.
"It's been a really devastating time for families. Some have been trying to support us but they're getting to the end of the threshold of what they can do."
The announcement meant the centre could keep its staff, although some were having to work from home for their own safety.
Childcare centres and before and after-school programs are funded by a combination of the federal government subsidy and a "gap" payment from parents. If parents keep children home and stop paying the gap payment, the government subsidy also stops.
The government announced its first rescue package for businesses hit by the coronavirus downturn on March 12. Since then, it has announced ever-bigger and more-wide-ranging support as it seeks to plus gaps.
The first stimulus subsidised wages for businesses who kept their staff, especially apprentices, and encouraged them to invest with tax breaks.
The second package vastly increased wage subsidies and doubled the unemployment benefit to $1100 a fortnight. It also doubled $750 cash payments that had been announced for pensioners. Many workers in the childcare industry are ineligible for the unemployment benefit boost because they are on overseas visas.
The third tranche, just this week, launched the universal $1500-a-fortnight wage subsidy for all workers whether they were still employed or had been stood down, also covering part-timers and long-term casuals who have been in the same job for 12 months.
It has yet to be legislated, with parliament expected to return next week to finalise the details.
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