Aged care wage rise to cost $11.3 billion

On Tuesday, following the RBA’s decision to raise the official cash rate to 3.85 per cent to lower inflation, Reserve Bank governor Dr Philip Lowe said wage growth was in line with the bank’s inflation target range, but the board remained alert to the risk of continued high inflation contributing to a possible price-wage spiral.


Treasurer Jim Chalmers said the funding would deliver “a fair day’s pay for a fair day’s work” for thousands of aged care staff nationwide but has previously acknowledged the decision would add pressure to the May budget. He released figures last month that showed aged care costs had blown out by $5 billion to $26.9 billion this financial year.

The bill will balloon to $35.8 billion in 2025-26 – a 21 per cent increase over the next three years, making it the government’s fifth-largest area of expenditure next to debt, the NDIS, health care and defence.

The government doesn’t directly fund the incomes of aged care workers, but rather subsidises the sector, with the amount per bed per day increasing by $26.30 to $243.10. Providers recently pledged to pass on the 15 per cent pay rise in full.

“Aged care workers have been doing it tough, with severe staff shortages during a pandemic,” Aged and Community Care Providers Association head Tom Symondson said recently.

“On top of this, workers across the nation have been feeling the squeeze over this past year as a result of rising inflation, higher interest rates and a general increase in the cost of living.”


The government hopes the wage boost will increase retention after Health Department documents published in March showed its pledge of around-the-clock nursing in facilities, and mandated time spent caring for each nursing home resident, would create a shortfall of about 25,000 workers in two years’ time.

With workforce shortages contributing to closures, providers citing tens of thousands of job vacancies nationwide, the government is also turning to migration to plug the shortfall.

Home Affairs Minister Clare O’Neil last week, when announcing changes to the migration program, conceded the crisis couldn’t be solved by the domestic population alone.

However, one of the announced changes was to cap the work rights of international students to 48 hours a week, which aged care providers said would devastate the already strained sector.

The government is also boosting access to education and training programs to help relieve workforce pressures.

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