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Aged care initiatives

The government has announced a record additional funding of $17.7 billion, allocated over the next five years, or roughly $3.5 billion per annum. In 2021-22, spending on aged care is estimated to be $25.9 billion. This is in response to the Royal Commission into Aged Care Quality and Safety which handed down its final recommendations in March 2021. The government’s aims are for this funding to contribute to a more accessible and sustainable needs-based system, to support older Australians to stay in their homes for longer, reform the residential aged care sector, and to grow the size and skills of the aged care workforce. Key measures for the funding include:

  • 80,000 new home care packages over the next two years, with $6.5 billion new funding, bringing the total to more than 275,000 by June 2023. 
  • Supports a vision for a new single “Support at Home” system delivering individualised care by the end of 2023. 
  • $3.9 billion over the next four years for mandated “care minutes” to reach a minimum of three hours and 20 minutes (200 minutes) per day for each of the 240,000 residents in residential aged care. This includes a minimum 40 minutes each day with a registered nurse.
  • A new government funded “Basic Daily Fee” supplement of $10 per bed a day, requiring $3.2 billion additional funding, for residential aged care providers to improve the sustainability of their services and operations. 
  • $798 million funding allocated over the next five years to support informal and family carers for older Australians with greater respite care and support services, as well as carer support for people with dementia.
  • Measures to grow and upskill the aged care and home support workforce, including 33,000 new training places for personal carers, an improved indigenous workforce, and retention bonuses for nurses within residential aged care.
  • Over $200 million is allocated to improve the ease in which Australians can navigate the system, including the development of 500 “Care Finders”, particularly in regional areas, and 250 First Nations people to support Australian’s understand the system better, as well as the development of a new star rating system to support Australian’s making decisions on residential aged care providers.
  • $365 million funding to enhance primary health care for older Australians, with improved connectivity between aged care and health care. 
  • Reforms to aged care are underpinned by new governance structures, including a new Aged Care Act, a new independent Pricing Authority for residential aged care funding settings and continuing to strengthen the capability of the sector’s regulator.
Federal Budget

Mercer’s Perspective


The budget announcement is a significant improvement on the funding allocation by the government over the past few years and it is targeting many of the key areas, as guided by the Aged Care Royal Commission’s final recommendations. Mercer welcomes this commitment of the government to addressing the “neglected” and “broken” industry, in the words of the Aged Care Royal Commission’s final report. The budget announcement, however does fall well short of additional funding called for by the Aged Care Royal Commission, the industry and other forecasters who believe the funding required is closer to $50 billion over the same period.

The budget funding and measures provides the foundation to begin to transform the industry. The new Aged Care Act and additional governance reforms are critical. These are directed towards supporting a needs-based systemfor living at home as Australians age, moving away from the rationed system of previous years based on expenditure targets regardless of the shortfall for Australians. The measures are also directed toward improving the sustainability of the residential aged care sector with increased financial support and measure aimed at improving the quality and safety for older Australians. There are also measures to increase the size, skills and quality of the sector’s workforce. 

A major “unspoken” issue within the Federal Budget relating to aged care is the need for greater private contribution to the funding. The government may have chosen not to address this ahead of the likely 2022 election, not wanting to be perceived as raising taxes ahead of an election. This is an important aspect highlighted within the final recommendations by the Aged Care Royal Commission and will need to be addressed in the not too distant future. The result however, is that the funding in support of the aged care sector reforms need to be much larger and can be achieved with a more meaningful funding contribution from individual Australians, as opposed to predominantly relying on the government funding only.

The aged care workforce is another aspect of significant weakness currently. Weakness in the sense of the number of qualified care workers, registered nurses and other related health professionals is well below the level required and is rapidly becoming less adequate as our society ages. In addition, within the existing workforce, the level of training and qualifications is falling short of what is required for a system which consistently delivers high quality care. The budget includes some measures to support training for new personal care roles. However it does not sufficiently address the seriousness of the issue including the need for a better more equitably paid workforce, which will in turn attract newcomers, plus the significant gap left by an estimated 174,000 fewer migrants over the next two years due to COVID-19 impacts. Treasurer Frydenberg concedes that filling vacant jobs without opening borders to migrant workers is a significant issue. The flow on also impacts the ability to properly provide the care required for the additional 80,000 home care packages announced. 

The allocation of 80,000 new home care packages is a further relief for Australians who have been assessed as eligible and in need of them. There is roughly 100,000 older Australians awaiting the right level of home care package, typically much longer than 12 months. The budget measures will take time to take effect and leave some Australians waiting for the home care they need, leaving them to either fund their needs privately, if they can afford to, or to receive less care or for families and their adult children to provide greater support. 



Implications for employers 

  • There was no connection made between informal and family carers of older Australians and their jobs and their employers. This is a significant impact for employers, not only for the wellbeing of their employees but also the level of productivity and ultimately profitability as a result of their impacted employees being focused on personal elder care necessities.
  • For employers in the aged care sector, there is some new funding and measures to support them in building and maintaining a workforce to the level of size and quality to which they would like. However, most employers within the aged care sector will be very disappointed that not more was announced. 

Implications for individuals

  • This budget is to be welcomed by Australian individuals on the basis of the increased size in funding and the support the government has committed to for the recommendations out of the Aged Care Royal Commission.
  • For those awaiting a Home Care Package, the pipeline for accessibility has been somewhat improved with the 80,000 new packages announced. The challenge will be accessibility as there are not enough qualified care workers to service this increase in new packages.
  • The reforms for residential aged care will support higher levels of quality and safety for residents and peace of mind for their families. These reforms will take a number of years to be put in place and be noticeable.
  • There will be a significant improvement in the level of support for informal and family carers in the form of more respite care and support services, as well as dementia support. In addition, navigating the system is receiving greater transparency and coordination, particularly for regional and First Nation Australians.







This content is intended to inform clients of Mercer’s views on particular issues. It is not intended to be provided to any person as a retail client and should not be relied upon or used as a substitute for professional advice specific to a client’s individual circumstances. Whilst Mercer believes the prospective information and forward looking statements made by Mercer in this report are based on reasonable grounds, they are predictive in character and may therefore be affected by inaccurate assumptions or by known or unknown risks and uncertainties. This content has been prepared by Mercer Consulting (Australia) Pty Ltd (MCAPL) ABN 55 153 168 140, Australian Financial Services Licence #411770. Any advice contained in this content is of a general nature only and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this content you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering and seek advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. ‘MERCER’ is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917.

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