top of page

Aged Care Market Conditions

Updated: Apr 6, 2022

There is no doubt that the Aged Care sector has been rapidly changing over the past decade. During this time there have been some major causal events, including the introduction of Living Longer Living Better legislation, deregulation of the Home Care Sector, The Royal Commission into Aged Care, introduction of the new Aged Care Quality Standards, and a once-in-a-hundred-year global pandemic. Underpinning this is quite possibly the biggest impact to the aged care sector. An impact 76 years in the making, dating back to the years following World War II – the Baby Boomers.

To understand the immediate and future impacts to the Aged Care sector requires analysis of a range of factors, including ageing, demand, policy, and workforce.

Care Requirements

One-fifth of people aged 65 and over will require care in the near future, and lifetime risk estimates suggest that half of men and two-thirds of women aged 65 and over will need formal aged care at some stage in their remaining lifetime. Aged care provision ranges from services at home with lower complexity and costs, to coordinated residential aged care with higher complexity and costs.


Population ageing is expected to result in increased demand for care over the next several decades. There is also some conjecture whether longer lives will be more or less healthy, and the severity of disabilities and how these will translate to care needs in the future, i.e. will health and technological improvements enhance the health of the aged. It is also noted that by 2026 there will be 43% of aged persons from culturally and linguistically diverse (CALD) backgrounds receiving aged care services, which creates another complexity in service provision.


Aged care is a $26 billion+ industry in Australia (FY2022 estimated expenditure), employing over 224,000 staff across more than 1,800 businesses that care for over 270,000 elderly and disabled Australians across the country.

The aged care sector is also fast growing in Australia, driven largely by our sizeable baby boomer cohort, who are estimated to be 5.5 million strong and make up our largest demographic group. Born between the years 1946-1965, the oldest baby boomer in 2022 is 76 years old – firmly in the retirement-age territory, whilst the youngest will be celebrating their 57th birthday. It goes without saying this massive demographic is a force to be reckoned with. Having already reshaped Australian culture and society over recent decades, the Baby Boomers are set to forever change healthcare, in particular, the provision of aged care in the years ahead.


The Federal Government's aged care expenditure, currently around $26b with 66% of this spend on residential aged care, will be driven by demography, expansions in planned supply, and unit cost changes. By 2050, it is projected to rise from 0.8% to 2.2% of Australia's GDP but will remain below the OECD average. Care recipients also contribute approximately $5.5 billion, which is increasing. This excludes accommodation payments such as refundable accommodation deposits (RADs) and bonds. In practice, care recipients receive care based on needs and will contribute to care based on means-testing.


Government funding is channeled to providers via consumer-directed care (CDC) home care package funding and to residential care providers based on each individual's assessed care need and complexity. The changes to resident funding by the AN-ACC model will have strategic and operational implications for providers.


Government policy is to keep a care-recipients in their home as long as possible, as this is aligned with the preference of the care recipient to remain in their own home as long as possible, it is a successful strategy. This is coupled with the lower costs of providing care in home care versus residential aged care, which provides a saving to the Commonwealth. Care recipients are typically entering care with higher care needs (dependency) with a shorter average length of stay.


With almost one third of Australia's baby boomers already past the official retirement age of 65, noting the pension eligibility age is increasing to 67 years for those born after 1 January 1957, and approximately 8% of all Australians aged 65 and over are living in residential aged care, demand for new aged care beds will rise by an estimated 76,000 places in the next five years.


Workforce challenges have been present over the past decade, but the presence of COVID-19 has drastically thrust this issue into the national spotlight. A shortage of qualified staff is putting additional pressure on the sector, particularly the lack of overseas nursing staff. Aged Care must compete with other sectors for staff, and typically offers less attractive remuneration packages in comparison. Coupled with one of the highest average staff ages (49 years), a large skills seepage due to high retirement over the next five years, and the need to increase staffing levels by 30% on top of replacing retiring staff, the aged care sector is in dire need of structural change to support workforce requirements.

Overall, these challenges are impacting aged care providers across Australia. They will continue to impact the way the sector operates until the Commonwealth Government takes decisive corrective action. It needs to be recognised, that everyday aged care providers support the lives of those in need across this country. The great work the sector does is often ignored due to a negative headline in the media. Change has to come in the near future….

Joseph Dimarco is the Managing Consultant of CareCFO. An accountant by trade, Joseph specialises in strategic consulting to the Aged Care and Disability sectors.

An expert in finance, governance, and business, he has worked with hundreds of providers to reach their financial and organisation goals and to ultimately fulfill their mission. To talk about your organisation’s needs, contact Joseph on or by calling 1300 07 55 11.

69 views0 comments


bottom of page