Child care will become completely free so parents can continue working during the coronavirus pandemic, Prime Minister Scott Morrison has announced.

Key points: Many parents have pulled children out of child care

Many parents have pulled children out of child care The industry has been calling for a bailout

The industry has been calling for a bailout All parents with kids in child care will be eligible for fee-free care, including students and those out of work

The Federal Government will spend an estimated $1.6 billion to fund the radical — but temporary — overhaul of the struggling sector, which has been pleading for a bailout as parents pull kids out of care.

Mr Morrison said free child care would be offered so essential workers could keep going to work, but Education Minister Dan Tehan later clarified all parents would qualify — including students and the unemployed.

"We want as many people being able to work as we possibly can, and we want them to be able to access child care as they need," he told the ABC's Afternoon Briefing program.

Under the plan, the Federal Government will pay half of the operating costs of Australia's 13,000 childcare and early learning centres.

The announcement comes after the sector warned plummeting attendance rates meant it was facing a crisis like never before, because of a massive hit to both of its income streams. Many centres have already closed.

"The old system was drafted for a pre-pandemic time," Mr Tehan said.

"We'll be moving to a different childcare system as of Sunday night. It will be a system that will mean parents will get their child care for free.

"Can I say to all of those parents: what we want to do by doing this is ensure your childcare centre will remain open so that where you normally take your child to get cared for, that will be there for you so you are not looking to have to go to a new centre."

Working parents, vulnerable kids given priority

The change is temporary. The Government says the new system will be reviewed after one month, and an extension will be considered after three months.

Existing means tests and rebates will be scrapped.

Mr Tehan said priority would be given to working parents, pre-existing enrolments, and vulnerable and disadvantaged children in particular need of early education.

He said the money would start flowing at the end of next week. Until the payments arrive, services will be allowed to waive gap fees for families who keep their children home.

Families will also be able to use 20 extra absence days without giving up their place in a centre.

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Parents who have cancelled their enrolment since February 17 are encouraged to contact their childcare centres and re-enrol, so their places can be held for future.

"Re-starting your enrolment will not require you to send your child to child care and it certainly won't require you to pay a gap fee," Mr Tehan said.

"Re-starting your enrolment will, however, hold your place for that point in time when things start to normalise."

Mr Morrison said child care and early childhood education was crucial, particularly for parents who relied on it so they could continue working in critical industries.

"Critical areas are not just the obvious ones — it is not just the doctors or the nurses who are at the hospitals, it is the cleaners at the hospitals as well.

"It is the people driving trucks to get food out to supermarkets and ensure the supplies continue.

"If you have a job in this economy then that is an essential job, in my view, in terms of the running of the economy and it is important that all of those parents who have children, that they get access to child care and those facilities will be there for them in the many months ahead.

"I don't want a parent to have to choose between feeding their kids and having their kids looked after."

Scott Morrison and Dan Tehan — and attending media — observed social-distancing as the announcement was made. ( ABC News: Matt Roberts )

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Childcare centres close after double-whammy hits sector

The childcare sector has been struggling to remain viable because of an exodus of children.

It relies on a mix of payments from the Federal Government and parents.

The Commonwealth Childcare Subsidy (CCS) makes up, on average, about 60 per cent of the upfront payment to centres. The rest comes from parents.

In the past month, many parents have kept their children at home over fears their children may get sick.

Children have also been kept home because parents have lost their jobs and can no longer afford childcare, or no longer need it.

That has meant the sector's been hit by a double whammy, losing both sources of income, and more than 600 childcare and after school care centres have closed.

Today's announcement means the Government will pay half of a childcare centre's operating costs, based on the number of children attending at the end of February.

But to qualify for the cash, a childcare centre must remain open and must not charge families for care.

Those payments will be additional to the JobKeeper wage subsidy payments also being made by the Government, Mr Tehan said.

"Sixty per cent of the cost of a childcare centre are the wages," he said. "With this scheme, we will be helping the sector to the tune of $1.6 billion."

Sector says its future is now secure — but Goodstart remains under cloud

The industry immediately welcomed today's package.

Early Childhood Association CEO Samantha Page said it meant childcare centres could keep operating, educators would remain employed and parents would have a place to send their kids.

"We were really not exaggerating things when we were talking about the sector being in crisis," she said.

"A lot of businesses will be relieved, particularly the fast-tracking of putting a new system in place so that services can implement that from next week."

Centre director Justine Rouse worries a coronavirus outbreak at a childcare centre is just a matter of time. ( ABC News: Patrick Stone )

But there are questions about the largest childcare operator, Goodstart. It does not yet qualify because its revenue is too large, and it has not yet lost 50 per cent of it.

Mr Tehan said he would continue to liaise with the company, but he was "not saying exemptions will be made".

"They make a profit of $100 million annually," he said.

But Goodstart told the ABC it had never made a $100 million profit and the company would have more to say later.

"Our profit last year was just 1 per cent — $11 million," a spokeswoman said. "The money the Minister referred to was net assets — not profits."

The company also says unless it secures an exemption from the JobKeeper rules so wage subsidies kick in early it won't survive.

"We are seeking an urgent commitment from the Government that Goodstart can access the JobKeeper payment at the 30 per cent benchmark for our people — only with that commitment can we keep our services open for 60,000 families."

Fears of a childcare centre outbreak

Some centre managers are angry they're remaining open at all.

Justine Rouse, the director of a centre in inner Melbourne, likened childcare centres to petri dishes.

"To all of our educators here, it is very surprising they are not closing us," she said.

"We feel as though it is only a matter of time before a large outbreak occurs at a childcare centre somewhere in Australia.

"It's almost the equivalent of letting 3,000 people off a ship in Sydney by letting childcare centres remain open."

Mr Morrison said the Government's decision was supported by medical advice.

"What we always have said in the health advice has been very clear and it has not changed," he said.

"There is no health risk to children going to school or going to child care."

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