Consultation with industry suggests the key reason for these low occupancy rates is workforce shortages, which mean facilities cannot operate at full capacity.

Smaller facilities are finding it particularly difficult to maintain workers and meet the requirements for 24/7 nurses. Media reporting suggests at least 18 homes have closed or are due to close in 2023, at least half of which have directly noted staff shortages as the reason for closing.

This is backed by data that shows that 13 residential providers left the sector in the December 2022 quarter. Many providers also report that they are not investing in new residential facilities due to staff shortages, as well as concerns around funding and financial viability.

Job vacancies in health care and social services remain the highest of any industry, showing the widespread demand for workers. 

Further wage rises will likely be necessary to attract the required number of workers to aged care. However, working conditions more broadly, such as rostering arrangements, training and career development, also need to change to encourage workers to join the sector.

There is a role for providers to look at building or providing accommodation for staff, however these shortages are part of a larger housing shortfall across the country.

Areas needing accommodation for key workers, such as those in aged care, should be prioritised under the Federal Government’s Housing Accord, with its target of 1.2 million new well-located homes over five years. The Government has yet to provide detail on this target or what criteria defines “well-located”.  In the shorter term, the National Rental Affordability Scheme could be revisited to provide targeted help to key workers such as those in the care sector who are struggling to rent in the private market but not eligible for social housing.

Funding arrangements must be overhauled

Data from the Federal Department of Health and Aged Care shows that more than half of all aged-care facilities are operating at a loss. This is unsustainable and prevents the industry from investing in its workforce and productivity improvements, both of which are sorely needed.

Improving workforce productivity will be critical to help facilities meet their staffing needs and improve care outcomes for patients. However, the industry currently has limited scope to invest in new technology, innovative practices or research.

Government funding will have to rise to meet the challenge of providing high quality care to older Australians. While Australia spends around the OECD average on aged care, it is well below the average of countries known for high-quality care such as the Netherlands, Scandinavian countries and Japan.

Funding arrangements in the sector must be addressed. There must be an expanded role for self-funding and user contributions. While there will always be a need for government funding, and some older Australians will not be able to contribute to their care costs, those who can afford to should contribute more to their care.

The Federal Government should consider limiting subsidised residential-care places and introduce a user-pays system for aged-care clients who meet certain income or asset thresholds. This will also allow for greater choice and consumer-driven care to meet the changing needs of the population.

Building confidence in the long-term viability of the sector is critical. As well as an increased role for user contributions, we will also need to address government funding through tax revenue as part of a broader tax-reform conversation and effective targeting of aged-care services to the population.

We should not introduce new income-tax levies to fund aged care, despite this being recommended by the royal commission. We cannot keep adding new levies to fund critical services. This increases our reliance on an inefficient tax base and will increase the tax burden on the shrinking proportion of the population that will be of working age in coming decades.

Conclusion

Aged-care providers are developing strategies to increase their workforce where possible.

Overall, they report some improvements in retention, and better use of existing staff. This is not enough to fill the worker shortage that has developed over the past few years, nor to keep pace with growing demands as our population ages and increased care requirements come into effect.

We will need to keep pulling all levers to address these workforce challenges, including by improving pay and conditions, training, technology and productivity and migration, as highlighted in CEDA’s first Duty of Care report, Meeting the aged-care workforce challenge. Current government responses are not enough.

Efficient and fair migration pathways must be part of the solution. CEDA continues to advocate for the creation of an essential skills visa to directly employ personal-care workers in aged care and other parts of the care sector.

The recently introduced Aged Care Industry Labour Agreements have proven difficult for providers to implement and are insufficient for broad application across the industry. But migration alone will not solve the workforce challenge.

Without further action, we will be unable to provide the care that older Australians and the broader community rightfully expect.