ASX aged care shares boosted after 2021 Federal Budget

ASX shares in the aged sector, like Estia Health Ltd (ASX: EHE), received a boost today after a big cash splash from the government.

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Shares in some of Australia’s biggest ASX aged care providers, such as Estia Health Ltd (ASX: EHE), Regis Healthcare Ltd (ASX: REG), and Japara Healthcare Ltd (ASX: JHC) received a boost today after the Australian Federal Budget for the next fiscal year was handed down.

Among several sectors poised to benefit from government spending outlined in last night’s Budget was the aged care industry. The Morrison Government has committed to spending $3.5 billion per year for the next five years to aid the sector.

Today, investors in the ASX aged care sector responded positively to the news. The Estia share price was up by 3.92% to $2.65, Regis shares surged by nearly 6% before closing the day even with yesterday’s closing price at $2.20, and Japara shares increased 3.47% to $1.045. For comparative purposes, the S&P/ASX 200 Index (ASX: XJO) closed the day 0.73% lower.

Furthermore, during intraday trading, both Estia and Japara shares hit new, 52-week highs of $2.75 and $1.08, respectively.

Let’s take a closer look at what the government is proposing for the aged care sector.

Funding increase

While the government will boost funding to aged care by $17.7 billion over the next 5 years, the figure is still well below the Aged Care Royal Commission’s recommendation of $10 billion per year. Despite this, ASX aged care shares still responded positively to the news.

The government revealed that 80,000 new home care packages will be funded as part of the arrangement. As well, $3.9 billion will be spent over the next 4 years to ensure all aged care residents receive at least 3 hours and 20 minutes of care per day, including 40 minutes with a registered nurse. The Commonwealth will also pay an additional stipend of $10 per day, per resident to aged care providers – another recommendation of the Royal Commission.

As well, the budget states $216 million will be spent over 3 years to provide more specialised training and $91.8 million over 2 years for 13,000 additional home care workers.

Finally, the government will spend $200 million to set up a new rating system so families can more easily compare and contrast different aged care providers.

ASX aged care share price snapshots

Over the past 12 months, the Estia share price has increased by 82.8%, Regis shares are up by around 48%, and the Japara share price is 80% higher. Back in November 2020, ASX shares in the aged care sector rocketed on the news Regis could be taken over. Brokers subsequently upgraded their analysis of some companies, and the entire sector took off.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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