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$5bn blowout in aged-care budget

Aged care is increasing pressure on the upcoming budget, but the Treasurer says the government will “do what we can” to deliver the necessary support

Treasurer Jim Chalmers has called out aged care, along with the NDIS, healthcare, defence spending and servicing debt as key pain points for his May 9 budget. Picture: Martin Ollman
Treasurer Jim Chalmers has called out aged care, along with the NDIS, healthcare, defence spending and servicing debt as key pain points for his May 9 budget. Picture: Martin Ollman

The Albanese government has vowed to “properly fund” the aged-care system despite a blowout of almost $5bn this financial year and an upcoming 15 per cent pay hike for care workers costing around $8bn over the next four years.

Treasurer Jim Chalmers has called out aged care, along with the NDIS, healthcare, defence spending and servicing debt as key pain points for his May 9 budget, but said the government would “do what we can” to ensure older Australians needing care continue to be supported.

Budget figures will reveal aged-care costs running to $29.6bn this financial year, $2.6bn more than anticipated in Dr Chalmers’ first budget just last October, and 23 per cent more than the $24.8bn that was spent by the government in 2021-22.

The costs will continue to grow to $35.8bn over the forward estimates to 2025-26, the figures show, but this is yet to include a 15 per cent wage hike for most aged-care workers that kicks in from July and which the government has committed to fully fund.

Aged Care Minister Anika Wells. Picture: Patrick Woods.
Aged Care Minister Anika Wells. Picture: Patrick Woods.

The government is understood to still be finalising the overall cost of the wage rise awarded by the Fair Work Commission, but industry experts anticipate the additional bill will be at least a further $8bn over four years. The final costs of the wage rise will be incorporated in the budget on May 9.

Dr Chalmers acknowledged the pressure aged care, now the government’s fifth-biggest spending measure, is adding to the budget bottom line.

“Within the considerable constraints we’re facing on the budget right now, we’ll do what we can to help Australians and we’ll do it in a targeted, methodical, responsible and affordable way,” he said.

“Whether it’s the interest cost on a trillion dollars of Liberal debt, the NDIS, aged care, healthcare or the rising cost of national security, the budget is under pressure from every angle.

“We owe it to our senior citizens to deliver adequate funding for aged care in this country.

“It’s what Australians expect and what our seniors deserve.”

Aged Care Minister Anika Wells said the government was “determined to restore dignity to aged care”.

“The Australians who helped build this country deserve safe and high-quality care,” Ms Wells said. “However, properly funding our aged-care sector comes at a price – with costs to increase in the budget by 23 per cent in the 2022-2023 financial year.”

Demand for aged care grew by 3.5 per cent between FY21 and FY22, with 1.5 million people receiving some form of support, either in-home or in a residential facility.

The demographics reveal that cost pressures from aged care are only set to intensify. While 16.5 per cent of the population was aged 65 and over in 2022 (4.4 million people), this will rise to 18.3 per cent, or 5.6 million people, in a decade. For the 85+ cohort, those who require more intense supports and services, the numbers will steeple from 543,000 to 806,000.

NDIS will be one of the key challenges for the upcoming federal budget

Funding aged care is a thorny problem for the Albanese government, particularly residential aged care, with its own figures revealing 66 per cent of private non-profit and for-profit nursing home providers operating at a loss, with average losses at $28 per bed per day.

A number of aged-care facilities around the country have been forced to shut their doors, with Wesley Mission last week announcing the closure of its three Sydney homes due to financial difficulties caused by meeting new government requirements on nursing care.

There are growing calls from within the sector for wealthier nursing home residents to be charged more for day-to-day food and services than the current $58.98 daily fee cap allows.

Dr Chalmers said aged care had been neglected by the previous Coalition government, pointing to the Morrison government’s last budget in March 2022 when it allocated $522m over the forward estimates over recurrent program funding.

“The Liberals and the Nationals cruelly underfunded our aged-care sector – this hurt Australian seniors the most but it’s also put incredible pressure on the budget,” he said.

But in the wake of the recommendations of the aged-care royal commission in 2021, the Morrison government committed $17.7bn over four years to improving the standard of care in homes, with a particular focus on the quality of food for residents.

The aged-care worker wage rise, awarded by the Fair Work Commission late last year, goes to registered nurses, enrolled nurses, personal care workers, head chefs and lifestyle officers.

For a personal care worker, this will add about $5 to their $32-an-hour package, including leave and super.

The award will bolster government costs by $1.7bn for residential care next financial year, and $500m for in-home care, StewartBrown aged-care analyst Grant Corderoy said.

Aged care is now the fifth-largest area of Australian government expenditure, behind servicing debt, the Age Pension, the NDIS and Medicare.

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Original URL: https://www.theaustralian.com.au/nation/5bn-blowout-in-agedcare-budget/news-story/e19f784caeb0853070049729d8100fcb