Huge Aged Care Pay Rises Won’t Worsen Inflation, Australian Government Claims

Ambulance officers transport a resident from the Epping Gardens aged care facility in the Melbourne suburb of Epping in Australia, on Jul. 29, 2020, William West/AFP via Getty Images

The Australian government has downplayed concerns that inflation will flare up following the record pay rises for aged care workers.

On May 4, the Labor government announced that the upcoming May 9 budget would include a 15 percent pay increase for aged care workers across the country as the Fair Work Commission recommended.

The new policy is expected to cost taxpayers $11.3 billion (US$7.53 billion) over four years and will come into effect from July 1.

Over 250,000 Australians working in the aged care sector will benefit from the policy, including registered nurses, enrolled nurses, assistants in nursing, personal care workers, head chefs and cooks, recreational activities officers and home care workers.

While the Reserve Bank of Australia expressed concerns about potential inflationary pressures arising from the pay rises, Finance Minister Katy Gallagher said there would not be any problem.

“Nothing we have seen in terms of how inflation is tracking and moderating would lead us to believe wages is a contributor,” she said in comments obtained by AAP.

“There’s a whole range of other reasons, and even when you break down the inflation stuff, it’s not being caused by wages.”

Australian Finance Minister Katy Gallagher speaks during a budget lockup press conference in Canberra, Australia, on Oct. 25, 2022. Martin Ollman/Getty Images

Treasurer Jim Chalmers said the new policy was necessary and could help tackle labour shortages within the struggling sector.

“This is what’s possible when we put the national budget on a more responsible and more sustainable footing,” he said.

“We’ve gone out of our way here to make sure we can afford, and we can work through in a responsible way this historic pay rise for aged care workers.”

How the Pay Rises Affect Aged Care Workers

Under the changes, a registered nurse on a level 2.3 award wage will receive an additional $10,000 a year, while an enrolled nurse on a level 2 award wage will pocket an extra $7,500 a year.

The additional payments for an assistant in nursing on a level 3 award wage and a personal care worker on a level 4 will be $7,100 and $7,300, respectively.

Recreational activity officers and head chiefs will also receive similar pay rises to the two positions above.

Furthermore, the weekly wage of a staff member with a Certificate III qualification will be lifted from $940 per week to $1,082.

Aged Care Minister Anika Wells praised the government’s move, saying it would alleviate the workforce problems in the sector.

“Today’s pay rise will bring 10,000 more workers to the sector ... we all know the workforce crisis is the biggest issue facing aged care,” she said.

“We will continue to work with everybody on this to make sure we do get enough workers not just in aged care but in the broader care economy.”

However, Shadow Treasurer Angus Taylor said the new salary package would fuel inflation.

“Labor’s kept talking a big game about how they’re doing all the right things, but we have world-beating inflation. Australia loves to be a world-beater, but not in this way,” he said.

Signage is seen at Arcare aged care facility in Maidstone on May 30, 2021, in Melbourne, Australia. Daniel Pockett/Getty Images

Meanwhile, the Australian Industry Group (Ai Group), the peak body for Australian industry, warned that the upcoming May 9 budget should aim to have a neutral impact on economic activities to prevent the negative effects of the government’s existing spending commitments, including living cost relief.

“With the economy already slowing significantly ahead of this week’s announcement of a further increase in the cash rate, and with the full impact of earlier interest rate rises still to flow through to household and business spending, the macroeconomic outlook is finely poised,” Ai Group CEO Innes Willox said.

“In Ai Group’s assessment, we now face roughly equal risks of undershooting and overshooting the sought-after soft landing. Against this background, the budget should aim to have a broadly neutral impact on the level of economic activity.”

Unions Call on the Government to Mandate the Pay Rises

Following the announcement, the Australian Nursing and Midwifery Federation (ANMF), which represents 322,000 nurses, midwives and carers across the country, said it was disappointed because the government did not provide a clear guideline on how aged care service providers should use the extra funding.

“While we’re pleased that the government has delivered on its promise to increase aged care wages, our big concern is that many nursing home operators won’t pass on the money intended for workers,” ANMF Federal Secretary Annie Butler said.

“We have good reason to be concerned about this because this is what has happened for the last 30 years when consecutive governments have given private aged care operators almost $2.5 billion, specifically to boost wages.”

The ANMF said there needed to be a mechanism to hold service providers accountable and ensure that providers would use the funding to pay their workers rather than boost their bottom line.

“We’re urging the government not to allow providers to ‘game’ the system and use the budget to set the rules and introduce accountability for a massive amount of public money,” Butler said.

“Otherwise, the industry just won’t have the workers to ensure nursing home residents get better care.