Sustainable funding

Public funds are a major source of funding for care and support services. Government funding is both appropriate and necessary to ensure citizens who do not have the means to purchase services in the private market can access necessary supports. This funding forms part of Australia’s social infrastructure.

However, in the face of increasing demand (both in numbers of people needing care and support services and expectations of service levels), there are challenges to continuing to finance care and support the way we currently do.

Australia’s care and support programs are funded through current Australian Government revenue, including taxes. Due to demographic changes—an ageing population and decreasing birth rate—there will be a smaller pool of working age people contributing income tax into the future. Ongoing reliance on tax revenue to fund the costs of care and support programs would require increasing tax rates or reducing government spending in other areas.

Government is not the only source of funding for care and support. Under the Child Care Subsidy program and in the aged care sector there are consumer contribution requirements, which are based the person’s capacity to pay. NDIS participants are not required to pay part of the cost of their supports, however self‑managed participants may choose to purchase more expensive services and pay the gap.

Current arrangements have evolved over time within each program stream rather than considering best arrangements across care and support programs. This is not to suggest that a uniform approach to consumer contributions across programs is warranted. There are good reasons for different approaches for programs accessed at different times across a person’s lifespan, or accessed in varying circumstances.

The use of sliding scales based on a person or family’s ability to pay is a commonly used mechanism in Australia’s social assistance landscape. This helps ensure that public funding is directed to those who need it most. It is important to maintain the vital social infrastructure role of the care and support economy, consistent with the Australian value of a ‘fair go’.

A national conversation about long-term sustainability

The forecast for significantly increasing costs across the care and support economy is a significant issue for the Australian Government’s budget and intergenerational fairness.

While this strategy proposes a number of actions and policy goals to improve services and make them sustainable, it is still all but certain that the costs of these services will significantly increase as a proportion of the government’s budget.

This means that there needs to be a broader national conversation about the expectations on government-funded service provision and the relative contribution between governments and individuals. This should include questions such as:

• What is the appropriate level of service governments should fund? What level of care and support do people need, which might be different from what they want?
• Should governments fund a universal, minimum standard of care and support, but allow people to purchase a higher level of care and support where they are able to? If so, what is the minimum standard of care and support governments should fund?
• More broadly, what is the appropriate mix of funding for quality services between government and individuals (noting this is likely to vary between specific services)?
• If Australians as a whole do expect the government to fund a high level of care and support services, would they accept an increase in taxation or a reduction in other government services to pay for this?

These are complex questions that cannot be answered quickly or easily. This Strategy is an opportunity to start a national conversation that will begin to address them.