BOARD OF TREASURERS Communiqué

In May 2025, the Board of Treasurers (the Board) commissioned Create Health Advisory and Professor Stephen Duckett AM to investigate the underlying drivers of recent cost growth in public hospital services. The work was commissioned to inform negotiations on the next National Health Reform Agreement (NHRA).

Today the Board have released ‘the Growth and Drivers of Australian Public Hospital Costs and Prices’ (the Report) publicly.

The Chair of the Board, the Hon Daniel Mookhey MLC, attended the Council for the Australian Federation (CAF) meeting held on 29 September to discuss the findings of the Report with First Ministers. The Board notes CAF’s statement in their subsequent meeting communique that:

States and territories remain committed to the deal struck in December 2023 – a key part of this deal was the Commonwealth’s commitment to fund 42.5 per cent of public hospitals costs by 2030 and 45 per cent by 2035.

Under the arrangement now proposed by the Commonwealth, the actual share of Commonwealth funding will be closer to 35 per cent, falling tens of billions of dollars short of what is needed.

The Board share the concerns raised by CAF in their communique that significant Commonwealth Government health funding shortfalls will impact the states’ and territories’ ability to provide the hospital services that Australians rightly expect.

The Create Health Advisory Report has identified several key cost growth factors that are legitimate, unavoidable, almost certain to persist over the medium-term and beyond the control of states, including:

1.The growing cohort of stranded long-stay patients in public hospitals, who are awaiting places in alternative accommodation (such as residential aged care, supported disability accommodation or community supports), which are typically areas of Commonwealth responsibility.

a.8–10 per cent of public hospital bed days are now occupied by patients awaiting discharge to another setting such as residential aged care facilities.

2.National and global clinical workforce shortages which have required the use of temporary contract labour to maintain service delivery and driven wage growth, particularly in the context of high inflation.

3.The high-inflation environment in the general economy, which has already increased non-labour costs and continues to influence labour costs.

4.A longer-term trend of increasing complexity of the public hospital patient cohort that requires more resource intensive care.

The Report provides nine recommendations for consideration by the Board to inform ongoings negotiations on the next five-year National Health Reform Agreement expected to commence in July 2026.

States and territories are acutely aware of the need to manage growing cost pressures and activity demands on public hospitals. As the Report outlines, states and territories cannot address these issues alone. The sustainability of public hospital funding is dependent on the Commonwealth committing to an equitable contribution that aligns with system priorities and real-world cost pressures. It is vital that the next NHRA incentivises the health and social care system to support timely discharge, strengthen out-of-hospital care pathways and improve system efficiency, so that the community receives the best possible care in the optimal setting.

The Board are willing to engage in positive discussions but call on the Commonwealth to also act in good faith and, within that context, to honour the commitments made at National Cabinet in December 2023.