Leading Age Services Australia chief executive Sean Rooney's comments followed the Fair Work Commission's decision to increase the national minimum wage from July 1.

Mr Rooney said indexation of funding for aged care has not kept pace with the rising wages of aged care staff or the growing needs of older people.

While his organisation supports the aged care workforce strategy, including goals to improve pay, conditions, training and career pathways, Mr Rooney said the challenge was to balance this with the realities of government-controlled funding "where indexation of subsidies is already falling behind wage growth and the ability of providers to raise prices is highly regulated".

He said despite wages increasing by more than 3 per cent per year over the last three years, he expected indexation of aged care funding to continue to be less than 1.5 per cent unless there is a change in government policy.

"The result is that in residential care, an estimated more than 40 per cent of facilities are operating at a loss and in home care the average earnings per client continues to fall, making many services unsustainable," he said.

"The situation is even worse in rural, regional and remote areas where access to staff and higher costs are further compounding financial stress and putting viability under particular threat."

Despite this, Mr Rooney said residential care providers continued to increase the hours of care per resident, however this could not continue indefinitely. Some providers had already been forced to cut back on staffing.

In home care, he said higher wages meant fewer hours of care could be purchased if there was no commensurate increase in the value of packages.

"This government must commit to urgent action to address the funding emergency if we are to meet the changing needs and expectations of the growing numbers of older Australians," he said.

The Senior