Federal and state funding will see a new early learning centre co-located at the Warragul Primary School site.
Australian prime minister Malcolm Turnbull was in Traralgon last month to announce $800,000 in federal funds for the project.
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This is in addition to $650,000 from the Government of Victoria.
The new kinder will help relieve some of the pressure on families trying to find places for their kids.
“There is an influx of young families moving to the Shire and as birth rates continue to rise, so does the need for early year’s services,” Baw Baw mayor Joe Gauci said in a media release.
“We face many gaps in local kindergarten service and infrastructure needs which, simply put, are out of Council’s jurisdiction.”
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Scheduled to be completed in 2019, a Baw Baw Shire spokesperson said the new kinder will feature “multi-use rooms tailored for kindergarten and play group use during school hours, allied health and early childhood intervention services during the day, and[…] the ability to [act as] a community hub outside of these times.”