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The Difference Between the NZ and AU Aged Care Sector

The aged care sectors in Australia and New Zealand are growing along with the aging population. In Australia, the sector is worth more than $20 billion. In New Zealand, that number is $3 billion, a consequence of the smaller population. Despite the close relationship between the two countries, they do many things differently.

Funding Retirement

New Zealand and Australia have different ways of funding retirement, which affects the whole industry. Kiwis have KiwiSaver, the New Zealand superannuation fund. This allows New Zealanders to save for their retirement with contributions from their employers. Australia has a similar system, with mandatory contributions by their employers. Unlike the New Zealand system, Australia's superannuation is compulsory, which means every Australian has a lump sum at retirement age to fund their life in the future.

However, Australia's aged pension is means-tested. This leads to more residents trying to game the system by hiding or spending their superannuation savings, so they are eligible for the pension. In New Zealand, where the aged pension is available to all, the government saves money on administering the payment, and Kiwis tend to save more, knowing it won't affect their payment from the government.

Funding Aged Care

In Australia residential aged care is funded by the federal government and provided by non-government organisations like charities, religious groups and for-profit businesses. Both state and federal governments fund and provide community care such as Meals on Wheels and in-home help.

Australia does have a more significant focus on a user-pay system, a focus that is increasing in New Zealand. The Australian funding for residential care works in a similar manner to the Occupational Rights Agreement in NZ retirement villages. With more money to invest and a need to market to those looking for care, Australia has more standalone care facilities than New Zealand. This has led to greater consolidation of the industry, although New Zealand is catching up in this regard, with big companies like Bupa joining the sector.

Retirement Villages

One area where the two countries do differ widely is in retirement villages. A 2015 study found that in the three years previous, both Australia and New Zealand built about the same number of retirement village homes to accommodate around 9,000 residents. The Australian population is about five times as large as New Zealand's, although age demographics are roughly the same, so Australia should be building about five times more accommodation.

Retirement villages aren't as popular in Australia. In New Zealand, 10.5 per cent of over-75s live in a retirement village, and that number continues to rise. In Australia, only 8 per cent of over-75s are in retirement villages, and that number is shrinking.

One reason for this is the continuum of care. In New Zealand, 63 per cent of villages have aged care facilities on site, giving residents a clear path of care. This integration of various levels of care requirements allows residents to go into a village certain that they can stay in the same community as their health needs change. In Australia, it's much rarer to see aged care facilities and retirement villages in the same community.

The second reason is funding. In New Zealand, the cost to residents is locked in when they enter the facility, whereas prices in Australia are linked to the Consumer Price Index. For Kiwis, knowing how much they will continue to pay into the future allows them to make a decision on where to live with confidence. For the providers, retirement village fees help subsidise the higher-cost aged care facilities, which is another benefit to providing both levels of care.

Despite the differences, aged care in New Zealand and Australia has many similarities. Both governments are focusing on ways to fund care for their aging population and on helping the elderly stay in their homes longer. The sectors in both Australia and New Zealand will continue to grow as the demand for services to the elderly increases over the next few decades.