Total government expenditure on aged care services

IBISWorld forecasts government expenditure on aged care services to increase 6.3% during 2024-25, to reach $38.7 billion. The proportion of the population aged 70 and over continues to grow as the baby boomer generation enters retirement. Furthermore, the Royal Commission into Aged Care Quality and Safety has established widespread issues within the aged care sector as part of its interim report. In response, the Federal Government has allocated significant additional expenditure over the past few years to address the issues raised by the commission. The 2024-25 Federal Budget includes initiatives like investing in a new regulatory and prudential framework which will be reflected in a new Aged Care Act. It also includes a $2.2 billion package aimed at strengthening Australia's aged care services sector. To meet the growing preference for older people to live in their own homes, the package also targets an additional 24,100 home care packages for Australians. This additional funding has supported growth in expenditure in the current year.

Public expenditure on home aged care is predominantly funded by the Federal Government under the Commonwealth Home Support Programme (CHSP) and Home Care Packages Program (which will be replaced by the Support at Home program in November 2025). Funding, administration and policy for aged care services were previously the responsibility of the states and territories under their respective Home and Community Care (HACC) schemes. Most states and territories transferred responsibility for HACC services to the Federal Government under the CHSP from 1 July 2012. The two exceptions were Victoria, which transitioned to the CHSP on 1 July 2016 and Western Australia, which transitioned on 1 July 2018.

Funding has significantly accelerated as a result of the Royal Commission into Aged Care Quality and Safety, which identified multiple key areas of concern within the sector. The Royal Commission's 2021 report recommended increased funding for the sector and additional reforms like mandated quality and safety standards for daily staff time. The pandemic also resulted in significant concern for the industry, as multiple outbreaks occurred in aged care facilities across the country. In 2020-21, the Federal Government responded by increasing funding to assist facilities in controlling and managing outbreaks, with an additional $746.3 million committed to the Aged Care sector in that year.

Increases in the elderly population and costs of services are the main drivers for total expenditure growth. An ageing population contributes to higher demand for aged care services and pushes for increasing investment in the expansion of capacity and service offerings. According to the Productivity Commission, expenditure per person (in 2023-24 dollars) aged 65 and above as well as Aboriginal and Torres Strait Islanders aged 50 and above continues to grow, from $5,680.38 in 2018-19 to $7,452.04 in 2023-24. As a result, IBISWorld forecasts government expenditure on aged care services to grow at a compound annual rate of 9.4% over the five years through 2024-25.