The federal government’s decision to lift the Australian National Aged Care Classification (AN-ACC) price by 2.55% from 1 October is not a funding increase in any meaningful sense.
Measured against wage growth, inflation and the timing of the rise itself, it is actually a significant cut to the money flowing into residential aged care, at a time when most providers cannot absorb one.
That is not a characterisation providers have landed on independently by coincidence. It is what the numbers show, and it is why peak bodies, group CEOs and finance leaders across the sector have converged on the same conclusion within days of the announcement.
The AN-ACC price rises from $295.64 to $303.19 per national weighted activity unit from 1 October, a nominal lift of 2.55%. Three facts strip the value out of that figure:
Because the increase does not start until three months into FY27, its effective value across the financial year is 1.91%, not 2.55%.
That is the number that should be used when the increase is compared to wage and cost growth over the same period, and it is the number Medical & Aged Care Group has put on the record. “A 2.55% funding rise in a 4.75% wage year is a cut by another name,” said MACG CEO Cameron McPherson.
The response from sector leaders has been unusually direct for an industry that typically manages its language around government carefully.
Anglicare Sydney CEO Simon Miller rejected the government’s framing outright: “Let’s be clear: this is not an increase and the Government shouldn’t be allowed to get away with calling it an increase. A 2.6% lift in the AN-ACC … when wages are increasing at 4.75% and inflation is running at 3.5% is a cut, it is reducing the money going into aged care.”
Miller invoked the Royal Commission into Aged Care Quality and Safety directly, recalling Commissioner Lynelle Briggs’ finding that government funding had repeatedly fallen short: that “it’s still not enough money to do the job properly,” and that decisions had “felt like the Government’s main consideration was what was the minimum commitment it could get away with, rather than what should be done to sustain the aged care system.”
Ageing Australia CEO Tom Symondson made the same case in plainer terms: “Just in case you skipped over the important part, let me repeat it, 2.55%. With CPI at 3.5%. And an increase in aged care salaries of 4.75% that came in more than two months ago and hasn’t been funded.”
His conclusion left no room for ambiguity: “Put simply, this ‘increase’, is a cut. A cut to providers, and a cut to older people.”
Bolton Clarke Group CEO Olivier Chretien identified the mechanism producing the shortfall: “The mandate that IHACPA has been given is to reduce provider margins on care to zero, but this is inconsistent with the investment that the sector needs to meet growing demand.”
Bolton Clarke has flagged it is still reviewing IHACPA’s methodology in full, with a more detailed response to come.
Superior Care Group CEO Russell Egan put the same conclusion in blunter terms: “This is obscene. With CPI and wages running at 3.5% how are providers supposed to pay the bills? We are delivering services on behalf of the Australian Government!”
The government’s justification is that the new price accounts for the 4.75% Annual Wage Review outcome, work value and gender undervaluation decisions, and non-labour cost growth.
That justification does not hold up against the outcome. A cost being factored into a pricing formula is not the same as that cost being funded in full, on time, at a rate that matches what providers are actually paying.
The FY27 effective rate of 1.91% is lower than the wage rise it is meant to cover and lower than inflation over the same period. On that basis, the funding does not meet the costs it is intended to meet.
There is a separate, deeper question sitting underneath this one, which Todd Yourell has raised directly: IHACPA is meant to be independent and cost based, yet government sets the final price, and IHACPA has itself acknowledged that compliance costs from the new Aged Care Act are not yet fully reflected in current pricing.
Sixty two per cent of providers were already operating at a loss before this decision. Government has stated it needs roughly 10,000 new aged care beds a year, against fewer than 1,000 currently being built.
A funding decision that falls short of real cost growth does not just compress margins, it removes the capital base needed to build the capacity the government has already said is required. Multiple CEOs have told Ageing Australia in the past week that they are shelving development plans as a direct result of this decision.
If that holds up under further reporting, this stops being a funding dispute and becomes a supply crisis with a clear, traceable cause.
