Government spending on aged care is expected to jump 23 per cent this financial year

As preparations for the May budget enter their final stages, Aged Care Minister Anika Wells has flagged that aged care funding - already the fifth biggest expense item for the Commonwealth - will grow by 23 per cent in 2022-23.

And it is understood that the cost will balloon over the next three years, jumping from $24.8 billion this financial year to an estimated $29.6 billion in 2023-24 and reach $35.8 billion by 2025-26 - a 44 per cent increase.

The growth is being driven in large part by the nation's ageing population. The number of aged care recipients surged 3.5 per cent in the year to mid-2022 to reach 1.5 million and is expected to continue growing strongly. As at mid-2022, 4.4 million were aged 65 years or older and the number is predicted to increase by almost a third to 5.6 million in the next decade.

But government reforms, including the requirement that from July 1 each facility operated by approved aged care providers must have at least one registered nurse on site and on duty 24 hours a day, 7 days a week, are also adding to the cost.

The requirement, which was one of the key recommendations of the aged care royal commission, has been blamed for contributing to the imminent closure of three Wesley Mission nursing homes in Sydney. Wesley said it supports the aged care reforms but rising cost and workforce pressures convinced it to exit the sector, affecting almost 200 residents.

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The reforms come at a difficult time for the aged care industry, which is already dealing with chronic staffing problems and will have to absorb a 15 per cent pay rise in the sector's minimum wage from June 30.

Ms Wells has said the reforms are needed to improve the care of aged care residents and is unapologetic about the rising expense to the budget.

"The Australians who helped build this country deserve safe and high-quality care and the Albanese Government is determined to restore dignity to aged care," she said, adding that the sector had for a decade been plagued by inadequate funding that had led to "compounded cost pressures".

But the rising cost of aged care is increasing the strain on government finances.

Government gross debt increased to almost $895 billion last October and the Grattan Institute has warned the interest bill will almost double to 1.7 per cent of gross domestic product in the next decade.

Treasurer Jim Chalmers admitted the budget was "under pressure from every angle".

The treasurer said the government owed it to senior citizens to deliver what he described as adequate funding to aged care.

"Within the considerable constraints we're facing on the budget right now, we'll do what we can to help Australians and we'll do it in a targeted, methodical, responsible and affordable way," Dr Chalmers said.