New Research: Commonwealth Can Afford $10b for Aged Care Recommendations

07 May 2021

Implementing the recommendations of the Royal Commission into Aged Care Quality and Safety will require additional Commonwealth funding of at least $10 billion per year, and there are several revenue tools which the government could use to raise those funds, according to a new report on funding high-quality aged care released by the Australia Institute’s Centre for Future Work.

Key Findings:

  • While the Royal Commission’s 148 recommendations were not explicitly costed, the Centre for Future Work report shows that $10 billion per year (approximately 0.5% of Australia’s GDP) would be the minimum required to move forward with the urgent reforms in regulation, employment practices, and quality benchmarks advised by the Commission.
  • Australia’s public spending on aged care is much lower than other industrial countries with better records of aged care service. It also notes that Australia’s overall tax collections are also much smaller (by about 5% of GDP) than the OECD average, and have declined relative to Australia’s GDP in recent years.
  • The report recommends that initial improvements in aged care funding should proceed immediately. With the Budget projected to incur major deficits for many years (due to the COVVID-19 pandemic and recession), it is neither necessary nor appropriate to fully ‘fund’ incremental aged care spending in the initial and most urgent years of reform.
  • However, as economic and fiscal conditions stabilise, additional revenue sources will be important in underpinning high-quality aged care. The report highlights five specific options for raising additional revenue – two of which were proposed by the respective Royal Commissioners:\
    • A 1 percentage-point Medicare-style flat rate levy (proposed by Royal Commissioner Briggs)
      A set of modest adjustments to personal income tax rates, preserving the existing progressivity of the system (similar to the proposal of Commissioner Pagone)
    • Cancelling the legislated Stage Three income tax cuts scheduled to begin in 2024 (which deliver most savings to the highest-income households)
    • Reforms in the treatment of capital gains and dividend income in the personal income tax system
    • Reforms to company taxes to eliminate loopholes and raise additional revenues

“Australia is one of the richest countries in the world. There should be no argument over whether we can afford to provide top-quality, respectful care to the elders who helped build our economy and our society,” said Dr Jim Stanford, Director of the Australia Institute’s Centre for Future Work, and co-author of the report.

“The government has access to a whole suite of revenue options to support the ambitious and quick implementation of the Royal Commission’s recommendations. That effort must start with the 2021-22 Commonwealth budget.

“There is no immutable economic or fiscal constraint holding back the government from doing right by Australia’s elders. The only question is whether this government places enough priority on caring for seniors with the quality and dignity they deserve,” Dr Stanford said.

"ANMF members have been calling out the failures in aged care for many years and urging governments to make the changes needed to ensure dignified care for older Australians. Governments have ignored these calls for as many years. This cannot continue. The findings of the Royal Commission into Aged Care Safety and Quality have made this abundantly clear,” said Annie Butler, ANMF Federal Secretary.

“This research demonstrates both the need for investment in the aged care sector and how it can be achieved leaving the Government with no legitimate excuses for continued inaction.

“However, there must be appropriate “strings attached” to any increases in funding provided to aged care providers, providers must be made fully and transparently accountable for the use of taxpayers’ money and assure Australians that their money is going directly to quality care for their loved ones. 

“If Australia is to regard itself as a compassionate, decent society the Morrison Government must stop the suffering and neglect of older Australians by acting now,” Ms Butler said.

“This report explains why aged care workers are left in tears after their shifts,” said Caroyln Smith, United Workers Union Aged Care Director.

“The $10 billion annual funding shortfall is leading to horrendous human costs in aged care, with older Australians left unsafe and vulnerable, and workers left physically and emotionally exhausted.

“This report once again underlines that the Federal Government needs to substantially and effectively address the human toll the aged care crisis is taking on older Australians, their families and aged care workers,” Ms Smith said.

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