Opinion article

Budget aged care spending a welcome cash injection but not enough to fix an ailing system

Flinders University Professor of Health Economics Julie Ratcliffe says that while the spending on aged care in the Federal Budget will help address the most urgent issues, more fundamental and far reaching changes are required to truly reform the sector.

The Federal Government has used the Budget to deliver its much-anticipated response to the Royal Commission into Aged Care Quality and Safety. Most of the 148 recommendations in the extensive final report emanating from the commission’s two-year proceedings were accepted either in full or in principle. They will be financed through a $17.7 billion cash injection for reform of Australia’s aged-care sector described by health minister Greg Hunt as a “once in a generation” overhaul. 

Key highlights include $6.5 billion over four years to create an extra 80,000 home-care packages and an additional $7.8 billion for Australia’s residential care sector, mandating minimum levels of care hours per resident and the introduction of new quality standards for dementia care, diversity, food and nutrition. 

While this support will help address many of the most pressing issues in aged care, it does not do enough to address the long-term funding and workforce questions that will determine the future success of the sector.  

A boost for home care

Research commissioned for the royal commission found Australia is a comparatively high user of residential aged, care with the highest proportion of older people living in institutional care compared with 11 other OECD nations.1 Given that the overwhelming preference of most Australians is to avoid entry into residential care and remain supported at home for as long as possible as they age,2 the significant increase in the supply of home-care packages will resonate with the public. 

Latest estimates indicate that almost 100,000 older Australians are waiting to receive a home-care package at their approved level of care.Whether the government response will be sufficient to meet the expectations of the commission that the home-care waiting list be cleared and that no older Australian in need should wait more than one month to receive a package remains to be seen. 

An important concern with the increase in the provision of home-care packages is regulation and oversight, which have been largely neglected in the sector. Previous research conducted by our team indicates that as much as 40 per cent of home-care package spending is eaten up by fees, with little over half of the spending allocated to responding to a person’s direct care needs.4 A significant overhaul of the sector is needed to ensure that the lion’s share of home-care expenditure goes where it should: on providing the care and services older people need to maximise their quality of life and wellbeing.

Where are the workers?

Another key component of the funding package is more than $650 million for a new workforce strategy. Around one-third of this will be spent on attracting and retaining newly graduated registered nurses into aged care.

Given that nurses in aged care are currently paid 10-15 per cent less than nurses in the health system, it is difficult to see how this strategy will succeed without this disparity being addressed head on. Other elements of the workforce strategy include new training and up-skilling opportunities for the existing workforce, and training for 33,800 new workers through subsidised vocational education places.  

However, several key royal commission workforce recommendations that would contribute to sector-wide improvements are notably absent, including that all aged-care workers obtain a Certificate III qualification as a minimum, and that a registered nurse be on site at all residential-care facilities 24/7. Questions have also been raised about the $27.9 million allocated over four years for allied health in aged care. This investment falls well short of prior expectations5 and is unlikely to ensure widespread access to adequate levels of restorative, reablement and rehabilitation services, which are so important for improving older people’s quality of life and wellbeing.

Who pays?

The Federal Government has signaled that the cash injection will not be financed through a levy, a key recommendation of the royal commission and a move which our research for the commission indicates is supported by the majority of current income taxpayers.2 Instead it will be financed through economic growth, as Australia maps out a road to recovery from the COVID-19 pandemic. This raises fundamental questions about the longer-term financing of aged-care quality improvements and the sustainability of a system that is currently predominantly publicly funded through income tax contributions. 

Australia’s rapidly ageing population will leave fewer people of working age to contribute in the future, and additional financial pillars of support will be needed. Stronger mechanisms to promote accountability and transparency of spending and sector-wide monitoring of outcomes are critical to ensure public confidence. This must include public reporting of new person-centered quality indicators measuring older people’s quality-of-care experience6 and quality of life7 across both home- and residential-care sectors. 

While the Budget cash injection for aged care is undoubtedly a welcome boost, it will take a sustained and far-reaching ‘generation-to-generation’ approach to elevate the system to one that all Australians can be proud of.



1. Dyer S, Valeri M, Arora N, Tilden D, Crotty M. Is Australia over‐reliant on residential aged care to support our older population? Medical Journal of Australia 2020; 213 (4): 156-157.

2. Ratcliffe J, Chen G, Cleland J, Kaambwa B, Khadka J, Hutchinson C, Milte R. Australia’s aged care system: assessing the views and preferences of the general public for quality of care and future funding. Royal Commission into Aged Care Quality and Safety Research Report No 6. Caring Futures Institute, Flinders University, South Australia, July 2020.

3. Australian Government Department of Health. Home Care Packages Program. Data report 2nd quarter 2020-21, March 2021.

4. Bulamu N, Kaambwa B, Gill L, Cameron I, Ratcliffe J. An early investigation of individual budget expenditures in the era of consumer-directed care. Australasian Journal oN Ageing. 2020 Mar;39(1):e145-e152.

5. Australian Ageing Agenda. Allied health a “real loser” in budget. May 13, 2021.

6. Khadka J, Ratcliffe J, Chen G, Kumaran S, Hutchinson C, Milte R, Savvas S, Batchelor F. A new measure of quality of care experience in aged care: psychometric assessment and validation of the Quality of Care Experience (QCE) questionnaire. Caring Futures Institute, Flinders University, South Australia, Feb 2021.

7. Cleland J, Hutchinson C, McBain C, Walker R, Milte R, Khadka J, Ratcliffe J. Developing dimensions for a new preference-based quality of life instrument for older people receiving aged care services in the community. Quality of Life Research 2021 Feb;30(2):555-565. 

About the authors

Julie Ratcliffe

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Julie Ratcliffe is the Mathew Flinders Professor of Health Economics in the College of Nursing and Health Sciences at Flinders University. She is also the inaugural health and social care economics theme lead for the newly established Caring Futures Institute. 

Professor Ratcliffe has co-authored over 200 articles related to the economics of health and social care policy appearing in leading medical and discipline specific journals including Journal of the American Medical Association, British Medical Journal, Health Economics and Pharmacoeconomics. She holds Honorary Professorial appointments at the School of Health and Related Research, University of Sheffield and the Institute of Health and Wellbeing at the University of Glasgow.