Aged care funding has improved – but confidence is still cautious
Funding boost welcomed, but investment gap remains
- Positive signal: $3bn package seen as Government listening to sector
- Confidence unchanged: Detail pending ahead of Budget night
- Investment challenge: Low returns still limiting new aged care builds
- Next test: Budget outcomes will determine future supply and development
For a sector expecting nothing, $3 billion is a meaningful shift.
Speaking to operators this week following the Government’s funding announcement, there is a sense the Government is listening to the sector – more than what was expected just weeks ago.
But there is also acknowledgement that the devil is in the detail – and that detail won’t be revealed until Budget night in two weeks’ time.
Until then, confidence hasn’t shifted.
The maths still drives decisions
As we report in this issue, the sustainability of the system remains a challenge.
Data from the Independent Health and Aged Care Pricing Authority shows the average cost of care is around $430 per resident per day, rising to as much as $1,800 in some rural and remote areas.
At the same time, the latest StewartBrown survey shows earnings continue to deteriorate as labour costs outpace funding.
That’s the perspective that operators are applying to last week’s announcement.
The increase to accommodation supplements, including the recommended $5 lift to the base rate, is seen as a positive signal. But signals don’t get projects the green light
It helps at the margin. It doesn’t close the gap between current returns and what is needed to push forward new builds, particularly with construction and workforce costs still high.
That flows directly into development decisions – the focus of this week’s edition of SATURDAY.
Greenfield projects are delivering returns of around 1-2%, while refurbishments can generate closer to 25%. Faced with that reality, providers will continue to allocate capital where it works.
What leaders are saying
It’s unsurprising then that the tone from operators has been cautious.
As Medical & Aged Care Group CEO Cameron McPherson put it to me this week: “These changes are a positive signal that the Government is listening… but the key now is ensuring these reforms translate into real, investable projects and additional beds on the ground.”
The same message runs through this week’s SATURDAY cover interview with Bolton Clarke Group CEO Olivier Chretien, where he warns that new aged care developments still do not meet investment hurdles. On the other hand, retirement village developments do.
Budget night is now the next test – and where the detail will determine whether providers have the confidence to build, and whether supply starts to shift.
SATURDAY features the first interview with Bolton Clarke Group CEO Olivier Chretien since taking on the role nine months ago. It’s a must-read. Not a subscriber? Sign up here.
