25/05/2026
Monday Money Talk with Noel Whittaker
Economics often comes down to one brutally simple principle: supply and demand. When demand exceeds supply, prices rise, queues form and shortages emerge. We see it in housing, childcare and electricity. Now we are watching the same slow-motion train wreck unfold in aged care.
Australia’s oldest baby boomers turn 80 this year. For the next decade, about 80,000 Australians will turn 80 every year. That matters because the need for health and aged care services explodes in our late seventies and eighties. More people need home care. More need help with meals, transport and medication. More will eventually require residential aged care. None of this is a surprise. Governments have known this wave was coming for decades, yet Australia still rations aged care services while pretending the system is coping.
On paper, the Budget announcements sound reassuring. The government says it is delivering 32,000 additional Support at Home places in the coming financial year, on top of 83,000 places by the end of this financial year. That would bring the total number of Australians receiving support to 420,000 by 30 June 2027. To the casual observer, those numbers sound enormous.
But today around 200,000 older Australians are already waiting for home care services. These are not future applicants. These are people who have been assessed as needing care right now, or who are awaiting assessment. Some are waiting for basic domestic help. Others need assistance with showering, dressing or medication. The average wait is close to a year. In the meantime, families are left to carry the burden while juggling work, finances and their own health problems.
A recent call to an ABC talkback program says it all. The caller’s father had been stuck in a hospital bed for weeks. After battling through mountains of paperwork, the caller finally got the news she had been praying for — he had been approved for residential aged care. She was ecstatic. Then came the crushing blow: “Yes, his need for care is approved, but there are no places. It may be nine months or more before we can admit him.”
That neatly sums up the crisis. Even if 420,000 Australians are receiving Support at Home services by 30 June 2027, Treasury figures suggest there could still be 37,000 people waiting — unless packages are freed up because recipients either move into residential care or die. And the demographic wave keeps growing. About 80,000 Australians turn 80 every year. Even if only half need support — probably optimistic — by 30 June 2027 we could still have 117,000 Australians needing care and waiting for it. The arithmetic is merciless. Demand is growing far faster than supply.
When governments ration services in a market where demand exceeds supply, queues are inevitable. That is exactly what is happening in aged care. Waiting times for residential care are now around a year as well. Families and friends are forced to fill the gaps. Hospital beds are clogged with older patients who cannot safely return home but cannot access aged care either.
Last year the government lifted the market price cap for aged care accommodation from $550,000 to $750,000 so providers could build new facilities and modernise old ones. But it did not equally increase funding for financially disadvantaged residents. Providers could effectively receive accommodation funding based on $750,000 from wealthier residents, while support for low-means residents was closer to $300,000. For many providers, especially not-for-profits, the economics quickly became ugly. Some openly warned they could not continue taking large numbers of financially disadvantaged residents because the funding gap was simply too large.
The Budget throws money at the problem—increasing the accommodation supplement for homes with high numbers of low-means residents. Some homes may eventually get support equivalent to about $580,000. But here's the rub: the extra funding doesn't start until March 2028. And even then? It still falls $170,000 short of the indexed $750,000 market cap.
Too little. Too late. Problem not solved.
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Governments are trying to walk a political tightrope. Taxpayers want quality care for older Australians, but they also want lower taxes and affordable budgets. Politicians therefore ration services while reassuring voters that everything is under control. But rationing never removes demand. It simply shifts the burden elsewhere. Families provide unpaid care. Older Australians pay privately while waiting for support. Hospitals become overflow accommodation. State governments wear the cost through longer hospital stays and rising health spending.
If aged care is rationed, surely priority should go to those with the fewest other options. The government will be asking why should millionaires receive subsidised home care when many older Australians cannot afford to buy private care and are stuck waiting for support? Residential aged care is already enormously expensive, particularly for people with high clinical needs, and those costs will keep climbing as the population ages. If governments continue to limit the number of places, tighter means testing may eventually become unavoidable.
This challenge will dominate for at least the next 20 years. But there is another issue almost nobody wants to discuss. What happens after the baby boomers pass through the system? Demographics are cyclical. Eventually demand will fall, and it may fall sharply. If governments and providers build tens of thousands of extra aged care beds now, what happens when occupancy rates decline decades from today? Providers are being asked to invest billions into facilities that may face completely different demand dynamics in 20 or 30 years’ time.
Economics always comes back to supply and demand. Australia’s aged care crisis is not happening because we failed to predict demand. It is happening because we predicted it perfectly — and still chose to ration supply.
