Australian Federal Budget 2024-25: Aged care 

As our society ages, with both an increasing number of Australians over 65 and longer life expectancies, the demand on the aged care and broader health system is rising significantly. As a result of this growth, the aged care sector faces several challenges:

The primary challenge is societal—there is a general lack of personal and familial planning for ageing. Many people do not adequately prepare for their own ageing or that of their family members until they are compelled by circumstances. This trend appears to be changing slowly as adult children, through firsthand experience in assisting their ageing parents, recognise the complexities involved and begin to plan for their own futures.

The aged care services industry is undergoing extensive structural changes, spanning multiple decades. These changes perpetuate the complexity and confusion for ordinary Australians trying to navigate the system. National eldercare support service Care & Living with Mercer customer data estimates it can take an Australian family an average of 190 hours over three to 12 months to put in place a new care arrangement for themselves, their parents or an elderly loved one. We believe the industry is far from reaching a stage where it can be deemed prepared or efficient, and it is expected to remain in a state of flux for at least another decade.

A significant and ongoing issue is the shortage of aged care workers. This problem was intensified by the COVID-19 pandemic, which restricted international travel and affected the migrant workforce heavily relied upon in this sector. The closure of international borders exacerbated the existing shortage. The reopening of immigration post-COVID has provided an opportunity to alleviate some of the workforce shortages in aged care and the Government has focused on supporting initiatives to boost the growth of the aged care sector workforce.

Chief amongst these initiatives has been wages increases, as awarded by the Fair Work Commission (FWC) in the form of two stages of increases totalling up to 28 percent. It is crucial not to become complacent but to continue these initiatives, ensuring sustained improvements in service delivery to meet both current and future needs.

As expected, to address the persistent issue of attracting and retaining staff in the aged care sector, the Budget reaffirms the Government’s commitment to fund the FWC decision to award a second stage of up to a further 13.5 percent increase in wages for aged care workers, covering direct and indirect associated costs. This builds on the 15 percent wages increase in the first phase last year, costing a total of $14.1 billion over four years. The second stage of wages increase is yet to be quantified or timing known until the FWC makes its final determination.

This measure is vital for making aged care a more competitive and attractive field for professionals such as occupational therapists and nurses. However, it may have the unintended consequence of attracting care workers from other critical sectors such as hospitals and childcare.

A total additional $2.2 billion funding is allocated for aged care in this year’s Budget, which includes:

• $1.4 billion over the next five years to upgrade systems and digital infrastructure necessary to implement the forthcoming Aged Care Act in July 2025.
• $531 million to release 24,100 more Home Care Packages in 2024-25. We believe this is a good step as it should help to further reduce the wait times older Australians currently face in receiving the home care package support they have been deemed eligible for.
• $111 million over four years for implementing the new Aged Care Regulatory Framework and the final report of the capability review of the Aged Care Quality and Safety Commission.
• Various other initiatives support key themes such as increasing the number and quality of training for the aged care workforce, continuing to prepare for the implementation of the new Aged Care Act in 2025, and strengthening the effectiveness of the sector’s regulator. Additionally, there are initiatives supporting older Australians living with dementia.

For aged care, this Budget is a conservative one in terms of new funding allocation as well as the strategic themes of how this funding is being allocated. It is sensible to continue to invest more in home care given the reforms over the past decade increasingly enabling elderly individuals to live at home for as long as possible. Despite these efforts, there remains a significant shortage of government-funded Home Care Packages and Australians still face long wait times to receive care.

In addition, the new Aged Care Act intends to place the consumer, the older Australian, at the centre of the system. This is a much-welcomed reform, but it is complex, making the budget allocation to support its implementation and operation essential. The aged care workforce is critical to meeting the needs and expectations of Australians relying on the aged care system and their families. The Government’s support of wage increases is important and commendable.

In recent years, the Government has increased funding for aged care in absolute terms to support the growing needs of its aging population. However, relative to the increasing number of Australians aged 65 and older who require aged care services, we believe the funding remains significantly insufficient. The Government faces a multifaceted fiscal challenge, needing to balance increased demands across many areas, including health, aged care, disability services, defence, and the burgeoning national debt with its rising interest payments. Consequently, it struggles to proportionally increase funding for aged care amidst these competing needs.

The Government-instigated Aged Care Taskforce released its final report and recommendations in early 2024, confirming a range of suggestions. Since the release of the final report, the Government has not made its response known, and any Budget measures related to the Taskforce's recommendations are notably absent. The recommendations detail how Australians with the financial means would be required to contribute more to their future aged care support.

This is a controversial aspect of Government policy, and it is possible that the Government has deferred addressing it while prioritising cost of living and housing crisis measures. However, we believe this continues to create uncertainty for aged care providers, individuals, and families planning for care.

There is a need for careful consideration regarding consumer contributions to ensure that any call for increased contributions is balanced with affordability. Those who can afford it should contribute more to ensure the sector's sustainability, while a robust safety net protects those with lesser means.

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