5261.0 - Economic measurement during COVID-19: Selected issues in the Economic Accounts, May 2020  
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This document was added or updated on 28/08/2020.

Classifying Commonwealth Government COVID-19 support to the aged care industry

The Commonwealth Government recently announced a number of targeted support packages to protect vulnerable households and businesses from the impacts of COVID-19 which included an extensive aged care package. Through this package, the government has leveraged off existing programs and policies where possible to deliver payments to the industry to both protect senior Australians and support those who care for them.

Referring to international manuals and guidance, the Australian Bureau of Statistics (ABS) has determined this COVID-19 support to the aged care industry will be primarily classified as either social transfers in kind or other subsidies on production within Australia’s economic accounts. This note describes the aged care support policies that are classified to these treatments and the rational for their classification.

Social transfers in kind

The System of National Accounts 2008 (2008 SNA) defines social benefits as “current transfers received by households intended to provide for the needs that arise from certain events or circumstances, for example, sickness, unemployment, retirement, housing, education or family circumstances” (2008 SNA, para 8.17). These events or circumstances cover social risks or needs “that may adversely affect the welfare of the households concerned either by imposing additional demands on their resources or by reducing their income. Examples of social benefits are the provision of medical services, unemployment compensation, and social security pensions” (IMF GFSM 2014, para 2.46). Social benefits include social transfers in kind which “consist of goods and services provided by general government and non-profit institutions serving households (NPISH) that are delivered to individual households” (2008 SNA, para 3.83).

Aged care baseline and supplementary funding is paid by the Commonwealth general government sector directly to individual aged care providers, which are predominantly classified as private non-financial corporations. This baseline funding is calculated using a funding scale which takes account of the composition of the residents’ assessed care needs in each facility (footnote 1) whilst the supplementary funding is additional appropriation to those aged care providers that are subjected to higher risks, such as those in rural and remote areas.

These government payments are classified as social transfers in kind as they fund individual services to households, are calculated based on the level of care each resident requires and have a strong link to social risks or needs.

The aged care support payments announced during COVID-19 that fall under this classification are (footnote 2-4):

    • increase to benefits paid through the Aged Care Funding Instrument,
    • increase to the residential and home care Viability Supplements and National Aboriginal and Torres Strait Islander Flexible Aged Care program,
    • additional support to deliver Commonwealth Home Support Programme, and
    • aged care support payment to all Commonwealth funded residential aged care providers to help cover additional costs of caring during COVID-19.

Other subsidies on production

For a payment to be considered a subsidy, it must have an influence on production - defined as “an activity, carried out under the responsibility, control and management of an institutional unit, that uses inputs of labour, capital, and goods and services to produce outputs of goods and services” (2008 SNA, para 6.2).

Subsidies are also more specifically defined as “current unrequited payments that government units, including non-resident government units, make to enterprises on the basis of the levels of their production activities or the quantities or values of the goods or services that they produce, sell or import” (2008 SNA, para 7.98). While subsidies may influence the level and/or price of goods and services, they may also influence “the remuneration of the institutional units engaged in production” (2008 SNA, para 7.98).

Subsidies on products are defined as “a subsidy payable per unit of a good or service” (2008 SNA, para 7.100). They may be a specific amount of money per unit of quantity of a good or service, or calculated ad valorem as a specified percentage of the price per unit.

Other subsidies on production are defined as “subsidies except subsidies on products that resident enterprises may receive as a consequence of engaging in production” (2008 SNA, para 7.106). Other subsidies on production influence the process of production and cover a diverse set of possible payments. The 2008 SNA provides two examples of other subsidies on production – subsidies on payroll or workforce, and subsidies to reduce pollution.

To ensure there is a continuity of the aged care workforce to deliver aged care services safely during the COVID-19 pandemic, the government is supporting aged care providers and workers by providing a staff retention bonus to the aged care workers as well as extra funding to enable aged care providers to hire extra workers and upskill existing workers on COVID-19 infection control (footnote 2 & 4).

These payments to support the aged care workforce are not classified as subsidies on products because employment forms part of primary income (as inputs of labour) and the payments fail the “payable per unit of a good or service” criterion from the 2008 SNA. The payments are instead conceptually classified as other subsidies on production as continuity of production by supporting the workforce is the primary objective. This is comparable to the conceptual treatment of other Commonwealth COVID-19 policies that have supported employment including JobKeeper and wage subsidies for apprentices.

1. https://www.health.gov.au/initiatives-and-programs/residential-aged-care/funding-for-residential-aged-care/the-aged-care-funding-instrument-acfi <back
2. https://www.health.gov.au/news/announcements/covid-19-supporting-senior-australians-and-those-who-care-for-them <back
3. https://www.pm.gov.au/media/new-covid-19-payment-keep-senior-australians-residential-aged-care-safe <back
4. https://www.pm.gov.au/media/24-billion-health-plan-fight-covid-19 <back

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