National aged care sector needs $72.3bn

A new report has found the aged care sector in Australia will need $72.3 billion over the next seven years to meet rising demand of the ageing population.

There will be an estimated 50 per cent increase in demand by 2031 under the current investment model, according to a sector report conducted by tax and advisory firm Grant Thornton.

The sector report published today has outlined key considerations needed to establish a sustainable funding model that would better support the aged care sector in the long term.

It found 33 per cent of the current investment model was comprised of for-profit providers and 11 per cent were government-funded providers, while 56 per cent were not-for-profit providers.

Grant Thornton national head of heath and aged care Darrell Price said the sector needed a better structured capital model to attract investors.

“According to our review, $72.3 billion would be required over the next seven years to adequately fund the development and refurbishment of residential care facilities in Australia,” he said.

“In order to fund this estimated $72 billion, capital will primarily have to found by the for-profit and private sectors, which is a shift from the current not-for-profit sector majority funding.

“A fresh look at the model of investment for the sector is required to ensure the rapidly rising demand can be met, and there is sufficient incentive for investors to invest in providers and for providers to invest in replenishment and replacement of older stock.

“In other words, the optimal capital required to be deployed across the sector to improve services for consumers is optimised.”

The report used research from the Aged Care Financing Authority and construction cost data to determine the total investment needed.

The ACFA estimated $40.25 billion would be required between 2024 and 2030 to support the provision of aged care facilities, but another report on construction costs released in May indicated this figure would be closer to $52.3 billion.

The report by Grant Thornton found the construction cost and the approximate $20.1 billion cost of maintenance and upgrades would equate to a total investment of $7.34 billion over a seven-year period.

According to the Royal Commission into Aged Care Quality and Safety, the number of Australians aged 85 years and older would increase 190 per cent by 2058, growing from 515,700 in 2018 to 1.5 million by 2058.

The report found this growth would significantly increase demand for aged care services, including home care and support providers.

Grant Thornton has offices in Perth, Sydney, Adelaide, Melbourne, Brisbane and Cairns.