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A 2.55% funding rise in a 4.75% wage year is a cut by another name

Medical & Aged Care Group

Medical & Aged Care Group warns that funding below inflation will weaken providers, delay investment and ultimately reduce aged care capacity.

 

Melbourne, Victoria - Medical & Aged Care Group (MACG) has warned that the Federal Government's latest residential aged care funding decision does not reflect the real cost of caring for older Australians, and amounts to an effective, real-terms funding cut for providers.

 

MACG is calling for an urgent reconciliation of the pricing decision against actual FY27 wage and non-labour costs; automatic and transparent indexation of both AN-ACC and the hotelling supplement; and a corrective mid-year adjustment where the funded assumptions do not match providers' real expenditure.

 

"Our aged care workers deserve every dollar of their wage increases. The problem is not paying people more. The problem is the government setting higher wage, care, compliance and reporting expectations, and then leaving providers to finance the difference." said Cameron McPherson, CEO of MACG.

From 1 October 2026, the AN-ACC price will rise from $295.64 to $303.19 per national weighted activity unit, a nominal increase of 2.55%. Because the increase begins three months into the financial year, its effective value across FY27 is only about 1.91%. Modern award minimum wage rates, by contrast, increased by 4.75% from 1 July 2026.

Labour is the largest cost of residential care. Providers are also absorbing increases in food, energy, insurance, maintenance, clinical systems and regulatory assurance. Annual inflation was 3.5% in July 2026, with health costs up 3.8%, food up 3.2%, electricity up 6.1% and insurance up 4.2%. Yet the hotelling supplement, which helps fund meals, cleaning, laundry and energy, remains frozen at $22.15 per resident per day.

"There is no discretionary version of aged care," said Cameron. "Registered nurses, personal care workers, meals, cleaning, laundry, electricity, infection prevention, clinical systems and safe buildings are not optional expenses."

The Government says the new price includes provision for the 4.75% Annual Wage Review, aged care work-value and gender-undervaluation decisions, and non-labour cost growth. But inclusion is not the same as adequacy. When the final rate trails both wages and inflation, and starts three months late, the purchasing power of funding falls.

Providers cannot bridge that gap indefinitely through efficiency alone. Over time, weaker operators withdraw, capital retreats and the supply of places tightens just as Australia needs more capacity.

"Australia cannot demand higher standards, more care, stronger governance, better buildings and fairer wages while funding providers below the cost of delivering them. Quality aged care is produced by people, time, food, facilities, systems and capital, and every one of those costs more than it did a year ago," said Cameron.

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