The Australian aged care sector is experiencing a remarkable financial turnaround, particularly in residential care, as detailed in the Quarterly Financial Snapshot (QFS) for October to December 2024, released last week by the Department of Health, Disability and Ageing.
With a year-to-date (YTD) net profit before tax (NPBT) soaring by $433.5 million, a striking 143.2% increase, to $736.2 million compared to Q2 2023-24, the residential sector is showing signs of robust recovery.
This article explores the drivers behind this financial resurgence, the role of government reforms, and how broader trends in workforce, care delivery, and home care are shaping the future of aged care in Australia.
A financial rebound in residential aged care
The QFS highlights a significant improvement in the residential aged care sector’s financial health. Key metrics tell the story: YTD NPBT per resident per day jumped by $11.94 to $20.69, with 71.5% of providers reporting a positive NPBT, up 6.9 percentage points from the previous year.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) also rose by $3.44 per resident per day to $45.77. Revenue growth outpaced expenses, increasing by 11.5% compared to an 8.6% rise in costs, largely thanks to a $0.7 billion boost in Australian National Aged Care Classification (AN-ACC) funding, reaching $5.6 billion for the quarter.
The 10.3% increase in the AN-ACC price, from $253.82 to $280.01 starting October 2024, played a pivotal role, supporting providers in meeting higher costs from the Fair Work Commission’s (FWC) Stage 3 decision on the Aged Care Work Value Case.
Additionally, the hotelling supplement rose to $12.55 per resident per day, and the new Aged Care Outbreak Management Support Supplement contributed $52.8 million since its February 2024 introduction.
Occupancy rates also climbed to 89.7%, up 2.1 percentage points, signalling stronger demand and operational stability. This financial uplift marks a stark contrast to a modest decline in Q1 2024-25, underscoring the impact of well-timed funding adjustments.
Reforms driving progress
Government reforms are at the heart of this recovery. The 4.4% increase in AN-ACC funding from December 2023, followed by the October 2024 price hike, has bolstered providers’ ability to cover rising labour costs, which grew due to higher median wages for direct care staff and increased care minutes to meet resident needs.
The QFS notes that labour costs, particularly salaries and employee benefits, drove expense growth, with total median staff costs rising to $235.88 per resident per day, up $20.67 from Q2 2023-24.
These reforms align with the government’s commitment to transparency and sustainability, as outlined in the QFS, and pave the way for future initiatives like the $6.4 billion investment over five years for FWC wage increases starting January 2025, targeting 340,000 aged care workers and 60,000 nurses.
Care minutes: Progress with room to grow
While financials are improving, compliance with mandatory care minutes targets, effective from October 2024, reveals mixed results.
The sector delivered 212.90 total care minutes per resident per day, falling 1.84 minutes short of the 214.74 target. However, registered nurse minutes, including a 10% contribution from enrolled nurses, hit 45.88 minutes, surpassing the 43.81 target by 2.07 minutes.
Yet, only 37.4% of services met both total and registered nurse targets, down 8.0 percentage points from Q1 2024-25, with metropolitan areas lagging despite fewer workforce shortages compared to rural regions.
From April 2026, non-specialised metropolitan services risk reduced funding if targets aren’t met, emphasising the push for better care delivery.
Workforce shifts: Less reliance on agency staff
A positive trend is the reduced use of agency staff, signalling improved recruitment and retention. Agency staff costs dropped to 7.9% of total direct care labour costs, down 2.1 percentage points, and hours fell to 5.8%, down 1.1 points from Q2 2023-24.
This shift aligns with increased compliance with care minutes, as total median staff time rose to 232.57 minutes per resident per day, up 8.47 minutes. However, regional and remote areas still rely on agency registered nurses, highlighting ongoing workforce challenges.
Home care: Steady gains amid challenges
The home care sector saw modest improvement, with YTD NPBT rising by $45.2 million (18.8%) to $285.1 million.
Revenue and expenses both grew by 19.1%, driven by a 7.9% increase in claim days and HCP utilisation rising from 80.7% to 85.8%. EBITDA increased by $0.49 per care recipient per day to $6.22, though 75.2% of providers reported a positive NPBT, down 0.7 points.
Unspent HCP funds grew to $3.8 billion, up $0.5 billion, raising questions about care delivery efficiency as the Support at Home program looms in July 2025.
Food, nutrition, and beyond
In residential care, the median cost of food and ingredients rose to $15.49 per resident per day, up $0.92, with 83.0% spent on fresh food.
This reflects efforts to maintain quality amid rising costs, supported by reforms to improve hotelling results. Liquidity and capital adequacy ratios also provide insight: the median liquidity ratio rose to 0.43, indicating better cash availability, while the capital adequacy ratio held steady at 0.28.
Looking ahead
The future promises further transformation. The Aged Care Act 2024, the Support at Home program, and $88.4 million in workforce initiatives will reshape operations, enhance quality, and address regional shortages.
The release of 7,615 Home Care Packages in December 2024 aims to cut wait times, while ongoing reforms will test providers’ adaptability.
