Paul Clark: Westpac Chief Economist on the report revealing the growing funding gap for the aged care sector

A new report finds the funding of aged residential care is not keeping up with the cost of providing it.  

The Westpac NZ report investigates what challenges and opportunities service providers could face in the future.  

It finds, with an aging population, people will require more complex and costly care.   

Westpac economist Paul Clark told Mike Hosking the biggest cost is labour, which made up around 70% of operating costs. 

He says that highly specialised labour is needed, and as more older people move into aged care facilities, they need higher and higher quality care, which requires better and better labour.  

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Episode Transcript

Speaker 1 (00:00):
Westpaker that to look at our aged care sector, they
report the funding gap is widening, probably no surprise short
fall of six hundred and fifty million last year, which
is up from one twenty fourteen. Paul Clark is the
Westpac New Zealand industry economisties with us. Paul, Morning to.

Speaker 2 (00:13):
You, morning morning.

Speaker 1 (00:16):
So important to talk about aged care versus a lifestyle
retirement village, right.

Speaker 2 (00:22):
That's right, they are basically separate, although you do yet
the report talks about two types of business models. One
of those a standalone and the other one is basically
a combination of age care facility with a retirement village attached.

Speaker 1 (00:44):
I think do you argue that that model is a
good model or a better model?

Speaker 2 (00:48):
Well, basically, I mean they tended to make more money
and they tend to be more profitable. And you know,
the report goes into quite a bit of detail in
terms of comparing the two and it does seem on
the face of it that that kind of model is
it tends to be more favorable.

Speaker 1 (01:09):
Yeah, does this take nothing away from your report? This
is just another health funding story, isn't it. I mean, yes,
the government will say, oh, we're putting more and more
money into but they're just not keeping up and therefore
the gap widens. It's that simple, wasn't it.

Speaker 2 (01:22):
Well, I think you know your funding basically it comes
into a number of different sources, one of which is
the residents themselves. So it's certainly true that government is
involved and that the residents are involved in that. And
it has increased and the amount of funding available is
basically increase faster than information. It's just also costs have
increased as well. And the big cost there, of course

(01:44):
is later remember correctly it was something around seventy percent
of total operating costs. So and you need those people
because when we talk about labor, it's really nurses, and
you need those people because they are highly specialized in
what they do. And increasingly is as older people move
into those retirement and retirement villas h care facilities, they

(02:06):
need more and more high acurity care and that requires
better and better labor.

Speaker 1 (02:10):
Exactly, we're living longer and I don't think that, well,
it's not like we haven't got the red flag here.
I appreciate you with Paul Paul Clark, who is the
Westpac New Zealand industry economist with us, this morning. For
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