Amid RBA’s looming rate decision, Australia faces wage hike pressure, led by public service: Robert Gottliebsen

The 25 per cent wage rise claim by aged-care workers, on the surface, has the potential to be one of the greatest domestic inflation boosters in the nation.

Longer term, the main game is not today’s Reserve Bank interest rate decision but rather the widespread increased wage pressure likely to be accelerated by selected parts of the public service.

The most prominent upward thrust comes from aged-care workers who are seeking a mammoth 25 per cent wage rise. On the surface that pay claim has the potential to be one of the greatest domestic inflation boosters in the nation.

Given our 8 per cent inflation rate, an increase of that order could spread like a bushfire first through levels of the public service and then into the private sector, perhaps via the building and transport industries.

It could lock in much higher inflation and interest rates. And yet we need aged-care workers to be properly rewarded to attract people with the talent and willingness to undertake the task.

Today I offer hope that we can substantially increase aged-care remuneration via a formula that, if applied generally, can facilitate wage rises without creating a raging inflationary bushfire.

There are odd things taking place in aspects of funding and administration of aged care and we can be grateful that the Productivity Commission is looking into the structures after a royal commission got side tracked on the use of independent contractors that represent about 1 per cent of the aged care workforce operating in the home.

The commission appears to have been playing politics but not surprisingly it sent Self-Employed Australia chief Ken Phillips delving deeply into other aspects of the commission’s report on providing aged care in homes.

Aged-care workers are seeking a mammoth 25 per cent wage rise.

The first stunning revelation is that the commission claimed that “there has never been an assessment of how much money is required to deliver high-quality care”.

Clearly if governments are going to fund anything or, if in the private sector you are running an enterprise, the first essential is to discover the real cost of the service you are providing. In the private sector those who don’t calculate their true costs usually go broke. In the public sector it usually means rorts are rife.

And thanks to some of the material buried in the Royal Commission report it did not take Phillips long to find out where the rorts were taking place and why aged workers were being ripped off. And I fear part of the enormous costs in the NDIS system (we are set to spend more on NDIS than defence) stem from similar rorts.

Under the commonwealth aged-care funding scheme, the highest level of home care (level 4) has a budget allocation of about $52,000 per person per year. The Royal Commission identified that this provides 8 hours and 45 minutes of care a week, which equates to 455 hours a year.

Dividing $52,000 by 455 hours means that the budget allocation is about $114 per hour for a service where we do not know the cost. However we do know some of the outlays.

The support worker who comes to the person’s home to look after them is paid $23 an hour (full-time). Add a casual rate, superannuation, etc and total remuneration is around $35 an hour, which represents just under a third of the government payments that go to those who carry out the actual care in the home. That’s a very low percentage.

The commonwealth contracts out the aged-care management to “Approved Home Care Providers” who design and manage the care package and engage or employ the workers who do the actual care in the home.

Payments seem to vary but, this is a service that is actually required and can be tendered. From the data available in the commission report it would seem that they cost about the same as the workers – about $35 an hour.

We can therefore see where $70 of the $114 an hour in government payments actually go but that leaves $44 an hour available for rorts or what can be classed as “other” costs.

Those receiving the “rort” payments and other costs will protest, but we can afford to pay the aged-care workers properly without any additional outlays.

Usually the people doing the job are far better equipped to know where there is waste and “rorts” than the highly paid executives. Right now our politicians are promising unsustainable spending boosts that are highly dangerous when there is 8 per cent inflation.

Cutting government expenditure can be used to limit interest rate rises. Some of the Royal Commission data has made awarding aged care wage increases easy to fund.

If state and federal public servants also want higher pay then they need to find ways of being more efficient. Royal commissions and productivity commission hearings are a cumbersome processes to isolate rorts and waste. It will be the people at the low levels who know what is going wrong.