Jacinta Collins (Victoria, Australian Labor Party) Share this | Hansard source

I too thank Senator Hanson-Young for raising this urgency motion today, mostly because it gives the Senate an opportunity to look a bit more factually at the circumstances in relation to ABC Learning child care. Having listened to Senator Payne just now, I have to say that she elaborated a very convenient and short-term portrayal of history.

The Rudd Labor government was elected on a platform to reform child care and establish a national early childhood agenda. There were good reasons why this was the case. Senator Hanson-Young raised some of the issues in her comments in relation to this urgency motion, but there are several others that I would like to address. Unfortunately, I may run out of time to recap some of the history, because it is also very important to look at what our contingency plans are. But I must, having been provoked by Senator Payne, at least cover some of those issues.

Child care is a vital service that families rely on in order to meet their employment and community commitments. Given the demands of the modern workforce, both the quality and the security of supply of childcare services are vital. Recent events highlight key inadequacies in the model established by the previous government that we have a plan to address. Unfortunately, the global financial crisis has meant some of those industry inadequacies are coming well to the fore.

In talking about industry inadequacies, let me take you to some of the comments made by former minister Hockey in this area. In the opposition commentary about what government should be doing at this stage, we first had Mr Turnbull saying we should not really be doing anything, that unviable centres should not be maintained, without even the constraint that there were some good, strong public interest grounds for at least doing it for the next two months. Mr Hockey moved back from that position and said, no, he accepted that our $22 million contingency plan was important and should be put in place to maintain support and services for the families and children involved. But he also made another very interesting comment which harks back to the history that Senator Payne has conveniently forgotten. He said that if there is an industry failure then we need government action.

There is an industry failure in this sector. It has been acknowledged that there is an industry failure. Senator Hanson-Young referred to that when she reflected on the concern of a multitude of parties about the dominance of ABC Learning being able to be developed under the policies of the previous government. There is a significant problem. It does not relate solely to the global financial crisis, however. There are a few points that should be highlighted there. ABC Learning has been severely affected by this financial crisis, but it was known for some time by financial commentators that ABC Learning was highly leveraged. As early as March 2006, Macquarie Bank researchers wrote:

At the current share price, strong growth has been factored in and ABC can’t afford to stumble.

This was back in March 2006. Citigroup noted:

Off-balance sheet leverage is quite high and real interest cover is low.

This is the kind of corporation that will come under the most intense pressure, should there be a credit squeeze. This was the case with ABC Learning, and we have known this for quite some time. The problem with the former government was that they were quite happy to allow this type of radical market experiment in the delivery of social services such as child care. That is the problem.

In addition, ABC Learning has quite a significant number of sites overseas. This expansion added additional risks to the company’s overall financial health, such as currency risk and also the difficulty of operating childcare services in markets with different needs. There have also been problems with the board for a considerable period of time. As the Australian Financial Review noted on 7 November 2008:

The composition of the ABC board points to many of the problems that have brought the business down. First up, it was top-heavy with politicians such as former Nationals MP Larry Anthony—

setting aside issues relating to ministerial codes of conduct—

and erstwhile Brisbane lord mayor Sallyanne Atkinson.