The chance of a sizeable funding package to implement the recommendations in the Royal Commission’s Final Report appears to be growing ever slimmer as the Government gets set to announce a multibillion-dollar economic stimulus package to try to avoid the risk of recession as the coronavirus spreads.
The package, expected to be detailed next week and is come in the form of tax relief targeting jobs, small business cash flow and capital investment, will come at a cost of “billions'” to the Budget, according to the Fin Review.
The Federal Budget – due on 12 May – is also predicted to fall into deficit – a far cry from the $7.1 billion surplus predicted last year.
Only one Sydney aged care home has so far been affected by the virus – but its threat has already had a significant impact on the listed providers’ share prices.
Since February 1, shares in Regis have dropped 32.8%, Estia 27.7% and Japara 13.1%.
Overall, the ASX 300 has lost 7.8% of its value over the same period.
These falls come on top of what has already been a rocky 18 months for providers since the Royal Commission was announced in September 2018.
The recently released half-yearly results from Regis, Estia and Japara have all underlined the continuing financial and regulatory pressure and the impact of the Royal Commission on the sector – all reported below-average results and declining profits.
Nationally, the occupancy rate has fallen to below 90% for the first time, while the costs of delivering care have continued to rise.
Meanwhile, the chance of funding for residential care in the Budget appears low with the Government appearing to be waiting for the release of the Final Report in November before making any more funding promises.
At a press conference in Canberra yesterday following a forum with sector representatives, Aged Care Minister Senator Richard Colbeck (pictured above) said there was the possibility of aged care specific funding to deal the risk of the coronavirus.
“We will consider what funding measures we need to take into consultation with the rest of the sector,” he stated.
But this will not address the underlying uncertainty facing the sector and its investors.
Who will want to finance new developments for a frail, vulnerable cohort?
Regis has already paused its development pipeline as it attempts to get back on track.
Ansell Strategic’s latest ‘In a Nutshell’ report on the performance of the listed providers highlight the “subdued appetite” of all providers for capital development projects.
This is despite the three operators having an increasing number of their facilities eligible for the significant refurbishment supplement (pictured above).
This is not likely to change if more facilities face outbreaks of the virus in the next six months to a year.
The fact is that aged care has always presented a conundrum. People want a better service, but this requires more money – and people don’t want to pay more.
Something must give.
The Royal Commissioners want a better system, but will the Government be prepared to pay – and will they have the cash to pay?
