Economic and Social Impact of the Aged Care Sector in WA
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May 2021 Economic and Social Impact of the Aged Care Sector in Western Australia Report to Amana Living, Baptistcare, Bethanie, Brightwater, Catholic Homes, Hall & Prior, Juniper, MercyCare, RAAFA WA and Rosewood. About ACIL Allen ACIL Allen is the largest independent, Australian owned economic and public policy consultancy. We specialise in the use of applied economics and econometrics with emphasis on the analysis, development and evaluation of policy, strategy and programs. Our reputation for quality research, credible analysis and innovative advice has been developed over a period of more than thirty years Suggested citation for this report ACIL Allen (2021), Economic and Social Impact of the Aged Care Sector in Western Australia, Report commissioned by WA Aged Care Providers Reliance and disclaimer The professional analysis and advice in this report has been prepared by ACIL Allen for the exclusive use of the party or parties to whom it is addressed (the addressee) and for the purposes specified in it. This report is supplied in good faith and reflects the knowledge, expertise and experience of the consultants involved. ACIL Allen accepts no responsibility whatsoever for any loss occasioned by any person acting or refraining from action as a result of reliance on the report, other than the addressee. In conducting the analysis in this report ACIL Allen has endeavoured to use what it considers is the best information available at the date of publication, including information supplied by the addressee. ACIL Allen has relied upon the information provided by the addressee and has not sought to verify the accuracy of the information supplied. If the information is subsequently determined to be false, inaccurate or incomplete then it is possible that our observations and conclusions as expressed in this report may change. The passage of time, manifestation of latent conditions or impacts of future events may require further examination of the project and subsequent data analysis, and re-evaluation of the data, findings, observations and conclusions expressed in this report. Unless stated otherwise, ACIL Allen does not warrant the accuracy of any forecast or projection in the report. Although ACIL Allen exercises reasonable care when making forecasts or projections, factors in the process, such as future market behaviour, are inherently uncertain and cannot be forecast or projected reliably. This report does not constitute a personal recommendation of ACIL Allen or take into account the particular investment objectives, financial situations, or needs of the addressee in relation to any transaction that the addressee is contemplating. Investors should consider whether the content of this report is suitable for their particular circumstances and, if appropriate, seek their own professional advice and carry out any further necessary investigations before deciding whether or not to proceed with a transaction. ACIL Allen shall not be liable in respect of any claim arising out of the failure of a client investment to perform to the advantage of the client or to the advantage of the client to the degree suggested or assumed in any advice or forecast given by ACIL Allen © ACIL Allen 2021 Contents Executive summary v 1 Introduction and Context 16 1.1 About this Engagement 16 1.2 Overview of Approach 16 1.3 Report Structure 19 1.4 Glossary of terms of abbreviations 20 2 Industry Overview and Outlook 22 2.1 History of Aged Care in Western Australia 22 2.2 Aged Care Sector Overview 26 3 Modelling Methodology and Assumptions 34 3.1 Methodology 34 3.2 Projected Activity and Expenditure Profiles 36 4 Economic Contribution of the Aged Care Sector 42 4.1 Introduction 42 4.2 Gross Product 43 4.3 Employment 44 4.4 Salaries and Wages 45 4.5 Taxation 46 4.6 Capital Expenditure Activity 46 5 Economic Impact of the Aged Care Sector 48 5.1 Introduction 48 5.2 Gross Product 49 5.3 Employment 49 5.4 Salaries and Wages 51 5.5 Taxation 51 6 Social Return on Investment in the Aged Care Sector 53 6.1 Introduction 53 6.2 SROI framework 54 6.3 Assessment of Benefits 57 6.4 Assessment of Costs 69 6.5 Findings and Results 69 Appendices 74 A ACIL Allen’s Models A-1 A.1 Input Output Modelling A-1 A.2 Tasman Global A-2 Contents B Economic Contribution Tool B-1 B.1 Overview B-1 B.2 How to use the tool B-1 Executive summary About this report The aged care sector provides a vital support to the comfort and dignity of elderly West Australians. While many West Australian’s acknowledge the positive contribution of the Care Economy, of which the aged care sector is a key part, an understanding of the social and economic magnitude of this impact is limited. Critically, the economic contribution of the aged care sector extends beyond a direct contribution through employment opportunities, but also indirectly by way of the wide range of suppliers across Western Australia that support the activities of aged care providers. It is vital that the aged care sector is viable and sustainable into the future, underpinned by an understanding across government and the broader community of the economic and social contribution made by the aged care sector. Establishing this understanding will help to ensure that aged care providers receive the appropriate level of support to continue to deliver high-quality services for their residents. In December 2020, a collective of Western Australian aged care providers engaged ACIL Allen to produce a detailed study quantifying the important economic and social impact of the Aged Care Sector to Western Australia’s economy and society more broadly. Working in collaboration with the Sector, ACIL Allen developed an approach that encompassed three core modelling tasks: — Economic Contribution of the Aged Care Sector in 2019-20, with financial information provided by participating Aged Care providers used as an input into ACIL Allen’s economic model of the WA economy to estimate the direct and indirect impact of the Sector on the WA economy, in terms of its contribution to Gross State Product (GSP), to wages and salaries earned, the number of Full Time Equivalent (FTE) jobs created or supported by the Sector, and the estimated Commonwealth Government tax collections in 2019-20. — Economic Impact of the Aged Care Sector over the 10 years to 2029-30, with financial projections provided by participating Aged Care providers used as an input into ACIL Allen’s economic model of the WA economy to estimate the direct and indirect impact of the Sector to the WA economy over the 10 years to 2029-30 in terms of the impact on GSP, on wages and salaries earned, and the number of Full Time Equivalent (FTE) jobs created or supported by the Sector and the estimated Commonwealth tax collections. — Social Return on Investment of the Aged Care Sector, which has been calculated through ACIL Allen’s Social Return on Investment framework (‘SROI’) for the aged care sector in Western Australia. The SROI seeks to quantify the impacts of the activities of the aged care sector which go beyond the economic activity, employment and taxation revenue generated, to include a quantification of the impacts on those receiving services and supports, and their immediate family and carers, from the quantifiable health benefits and outcomes to people receiving care, to the benefits from additional labour force participation due to the provision of care that would otherwise be provided by family. v To provide a complete and comprehensive assessment of the aged care sector, ACIL Allen was able to build up a comprehensive financial profile of the WA Aged Care Sector through the participation in this study by the following 12 WA aged care providers: — Amana Living — Juniper — Baptistcare — MercyCare — Bethanie — RAAFA WA — Brightwater — Rosewood — Catholic Homes — St Bart’s* — Hall & Prior — Umbrella Multicultural Community Care* *Data partners ACIL Allen estimates that together these 12 providers are estimated to represent 34 per cent of the aged care market in WA. By service line, the 12 providers are estimated to represent 42 per cent of the residential aged care, 21 per cent of home care, and nine per cent of home support services. To capture those providers in the aged care sector that did not participate in the study, ACIL Allen sourced sector-wide information from the Aged Care Financing Authority which enabled a comprehensive whole-of-sector financial profile of the WA Aged Care Sector to be developed. Economic Contribution of the WA Aged Care Sector, 2019-20 A summary of the economic contribution of the Aged Care Sector to the WA economy in 2019-20 is presented in Figure ES 1 below. Figure ES 1 Economic Contribution of the Aged Care Sector in 2019-20, Summary Results Source: ACIL Allen vi Contribution to Gross State Product The Aged Care sector is a significant component of the WA Economy. ACIL Allen estimates that the sector directly contributed $2 billion to the WA economy in 2019-20 – directly accounting for one in every seven dollars of activity across the entire Healthcare and Social Assistance sector ($15.1 billion). When combined with the indirect economic activity generated by the Aged Care Sector ($1.8 billion), ACIL Allen estimates that its total contribution to the WA economy reached $3.9 billion in 2019-20. To put this value into perspective, total contribution of the aged care sector is equivalent to three times the size of the Arts and Recreation sector, half the size of Retail trade sector and a quarter of the total activity from the Construction sector. ACIL Allen estimates that for every $1 million of expenditure by the sector in delivering services and supports to its clients, an additional $1.5 million in total gross product is generated.