Coalition and Labor pledge no new taxes – will Plan B prove key to funding aged care wage rises?

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The Fair Work Commission (FWC) has begun hearing the unions’ case in support of a 25% wage increase for aged care workers, but with the Morrison Government and the Opposition both promising no new taxes in a bid to win over voters, the new Government is facing a potential funding black hole.

With the polls putting Labor in the lead ahead of the 21 May Federal Election, Prime Minister Scott Morrison pulled out the big guns on Sunday, promising no new taxes for the next four years if his Government is re-elected.

The Coalition’s Lower Tax Guarantee pledges no new taxes on Australian workers, retirees, superannuation, small business, housing, and electricity, alongside $100 billion in tax relief for workers.

Labor has similarly pledged not to increase taxes as its leader Anthony Albanese still trails Mr Morrison as preferred Prime Minister.

But the election promises spell trouble for the new Government if the FWC decides to come down in favour of a wage rise for aged care workers, as hearings into the unions’ work value case began this week.

New Govt left to foot the wage rise bill

The FWC has stated that the tribunal won’t be swayed by Government funding constraints when deciding by how much to lift wages for the sector – leaving the cost to whichever side wins the election.

FWC President Justice Iain Ross did add that Government funding could include when the wage rise comes into effect – and how it should be phased in.

Sources tell us that a 6% rise per year over four years is a more likely outcome than a full 25% upfront.

But this poses a serious funding problem for the new Government – as we have reported, StewartBrown’s Grant Corderoy has costed the move at up to $18 billion over four years.

Unions and providers agree that workers have been historically underpaid and need a wage rise sooner rather than later if more staff are to be attracted and retained.

So, where will the money come from?

Plan B the only option

Whichever side comes out on top on polling day, the country is facing a huge national debt thanks to COVID-19.

If the new Government is unwilling to place an increased tax burden on Australians, that leaves only one source of new funding: Plan B, or increasing co-contributions for aged care.

Allowing older Australians with the means to pay to contribute to their accommodation and everyday living expenses – as they would at home – will increase funding to the sector, while still enabling those who need support, but lack the financial means to pay, to access care.

Post-Election, can we start this conversation – before the FWC hands down its ruling?

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