This $4.8 billion increase was almost double the $2.5 billion Labor promised to spend before the election.
The extra cost of meeting these standards over the next four years, plus the new wages bill, will result in aged care costs increasing by at least $30 billion over the forward estimates.
The $11.3 billion cost of meeting the 15 per cent wage increase will deliver weekly pay rises ranging from $196.08, or more than $10,000 a year, for a registered nurse, to around $150 a week for cooks, care workers, activity officers and other workers.
In Labor’s first budget, handed down in October last year, Dr Chalmers set aside $7.5 billion in the contingency reserve in anticipation of the wage case which was still before the Fair Work Commission.
Anthony Albanese had gone to the 2022 election pledging to support a union application for a 25 per cent pay rise for the sector’s 300,000 workers, warning that without a generous increase, the sector would struggle to retain staff, let alone recruit more.
He also promised a registered nurse working 24/7 in every nursing home by July 1, this year, but this deadline will not be met.
In February, the Fair Work Commission granted an “interim” wage increase of 15 per cent based on the workers’ increased work value and qualifications.
The Albanese government welcomed the decision but urged the increase be paid in two instalments – 10 per cent this year and 5 per cent next year – to relieve pressure on the budget. The Commission rejected this.
The union continues to argue for an additional 10 per cent pay rise to bring the total increase to 25 per cent.
Cost warnings to temper budget demands
Dr Chalmers said the increase would provide cost of living relief to some of the nation’s lower paid workers and help close the gender pay gap.
“This important investment is a positive step to improving women’s pay in general as women make up more than 85 per cent of Australia’s aged care workforce,” he said in a statement.
“This investment recognises the incredible contribution that aged care workers make to our economy and community and will help to create a bigger incentive for young Australians looking for a rewarding career to pick aged care in the future.”
Dr Chalmers is hoping the cost of aged care, the fifth-fastest growing area of the budget after interest payments on debt, the NDIS, health and defence, will help temper demands for spending in other areas, to avoid making inflation worse and in the interest of affordability.
At least nine Labor backbenchers have called publicly for JobSeeker to be increased by about $18 a day acoss the board, as recommended by the government’s handpicked Economic Inclusion Committee.
None was backing down after the rate rise.
“I don’t think it’s inflationary and at a time when we are seeing cost of living pressures, the government must spend money in the most efficient way,” Ms Thwaites said.
“We do have evidence that this (increase) would be effective in lifting people out of poverty.”
Ms Payne concurred.
She said JobSeeker was too low to live on and she did not believe the increase would be inflationary because, as some economists have argued, it would be spent on bills.
“The number is not that big in terms of the economy,” she said.
The government is likely to only increase JobSeeker for over-55s, the most vulnerable cohort which consists of mainly women with few means and scant prospects of a job.
There will be cost of living help for other age groups but in different forms.
“People understand that this government, led by Anthony Albanese, is very focused on the real cost of living pressures that people are facing every day,” Dr Chalmers said.
“It is why the budget will have a substantial package of relief when it comes to medicines, it will have a package on child care, there will be a bit of help for people with their energy bills to try and take some of the sting out of that.”
In a pre-budget monitor, Deloitte Access Economics partner Stephen Smith said the budget would show an estimated $87 billion revenue boost over four years, but “a worsening of the longer term structural deficit”.
“Given the seven large and critical areas of government spending that are growing most rapidly – health, education, welfare payments, aged care, the NDIS, defence and interest costs – it’s hard to credibly and comprehensively reach a different conclusion,” Mr Smith said.
“Government spending as a share of the economy will very likely be higher in the future than it has been in the past.
“All Australians should be on notice that taxes will likely need to be higher in the future.“