Issues looming for aged-care sector as wages rise and costs increase

Increased funding for aged-care sector staff working for listed companies is covering wage cost inflation, but issues are looming for the otherwise booming sector.

The increase in wages may  yet prompt a detrimental effect for private paying residents and  also for smaller, private rest-homes, as the cost of care begins increasing. Forsyth Barr broker Lyn Howe said the aged-care sector had secured a "blended funding" increase over the coming year of about 4.5%.

In April last year the about 55,000 care workers, mainly women, secured a $2billion Government package which will result in pay rises of up to 20%, worth up to $5000 a year each.

The Care and Support Worker (Pay Equity) Settlement Act covered workers in the aged residential care, home support and disability service sectors.

"The increase looks fair and should mean the major operators will be able to cover the wage cost inflation the sector has been facing," Mrs Howe said.

There was a general funding increase of 2% and, with another round of increases from the equal pay settlement, she expected that to offset wage cost increases of the major aged-care operators.

The main players are Arvida Group, Metlifecare, Oceania Healthcare, Ryman Healthcare and Summerset Group.

However, Mrs Howe also had a caution for the sector.

The NZ Aged Care Association’s latest aged-care price index, covering the year to last March, had increased by 7.8%.

"That’s indicating significant cost pressures remain, especially for the smaller operators which might be lacking in scale," she said.

She said private paying resident represented about 30% of the sector and would face a fee increase, given  the rest-home rate increase.

"This could have an impact on the ability for [smaller] operators to lift premiums in the near term," she said.

She noted that as at March, the increase in resident numbers of 1.5% had outstripped an  increase in bed numbers of 0.5% for the quarter.

"We expect this trend to continue," she said. 


At a glance

Daily contract prices at June 1 this year.

Rest-home care levels up 6% to $134

• Dementia care levelup 5% to $183

• Hospital care levelup 4% to $211

—  Source: NZ Aged Care Association

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