Home care, not nursing home care, will be the centre of aged care policy under the Federal Government's new aged care reform package, the Minister for Mental Health and Ageing, Mark Butler has told a CEDA forum in Adelaide.

Mr Butler told the aged care forum that the clear message from consultation with older Australians showed that most did not like the current system which was built around residential care and nursing homes.

"What people want more than anything else from an aged care system is support for them to stay in their homes for as long as possible - and if possible - for the rest of their lives," Mr Butler said.

"That doesn't mean that we don't continue to need, as a country, high quality residential care for people to fall back on - probably later in life and for shorter periods. We need to send a message to older Australians that we have heard that message and what we are going to do is build a system that enables people to stay in their homes as long as (they) possibly can," he said.

Mr Butler and a panel, which included board member of the seniors organisation COTA, Emeritus Professor Anne Edwards, and board member of aged care provider ACH and the Social Inclusion Board, Mary Patetsos, said that the Federal Government's aged care reforms represented a "game-changing approach", focusing on positive ageing.

The forum heard that aged care reforms would address:

• Home care for older people;
• Sustainable and adequate retirement incomes for retired people;
• Structural and cultural barriers to increase workforce participation
• Ageing strategies for culturally and linguistically diverse Australians; and
• Housing issues for retired people.

Mr Butler said housing for older people over the next few decades would become the most significant challenge for aged care policy as only two per cent of people over 65 are likely to own their homes outright by 2050 - down from 78 per cent in 2012.

"We've already seen a reduction in the number of baby boomers who own their own home outright, often due to things like separation, and I think that this will remain a significant policy challenge for national and state governments," he said.

Barriers to downsizing such as stamp duty, the pension test and a lack of suitable housing for older people would also require a strategic approach to policy, Mr Butler said.

The panel said that the aged care reforms represented a shift away from the gloomy outlook presented by Treasury's first two intergenerational reports. These reports highlighted the fact that age-related expenditure constitutes 25 per cent of the Federal Budget and this is expected to increase to 50 per cent of the Budget in the next 40 years.

Mr Butler said that while economic woe in Japan and continental Europe had been caused by their governments' inability to manage a declining ratio of employed people to retired people, Australia was implementing reforms by:

• Increasing the retirement age from 65 to 67;
• Promoting greater workforce participation of older people;
• Changing the indexation rate to ensure the pension rate reflected the cost of essentials;
• Changing the superannuation guarantee charge from 9 per cent to 12 per cent by 2014;
• Changing the co-contribution rate for retirement care; and
• Establishing an ageing strategy for culturally and linguistically diverse people to enable them to shape their own aged care facilities.

"For us the move from 9-12 per cent over the coming years is a very significant long-term reform as well as something that will improve retirement incomes for millions and millions of people," Mr Butler said.

This would mean another $130,000 in superannuation for a 30-year-old currently on an average wage, he said.

While structural reforms were being implemented to allow older workers access to income protection insurance and workers' compensation, major cultural reform was needed to encourage older workers to work longer.

Although workforce participation of men and women over 65 had increased dramatically (by 150 per cent and 200 per cent respectively) over the past decade, employers and employees needed to alter their views about the nature of work for older people.

"The question of whether baby boomers are all going to step into their Winnebagos at the age of 65 and head off into the yonder or whether they do continue to work, albeit a bit differently in the workforce is... a profound policy challenge," Mr Butler said.

"The lack of capacity of a government to manage the dependency ratio issues, particularly when it comes to retirement incomes and workforce participation issues can, quite frankly, come close to bankrupting a country. So I don't underestimate those challenges."

"We are not good at reverse gear in the work place. Australian workplaces are generally predicated on the idea that you crawl up the ladder and you get off it. There is not a good culture of us coming back down the ladder, changing the way we work, reducing our hours, perhaps stepping down a bit in our seniority in an organisation."

Mr Butler said: the most tragic thing about dealing with the question of ageing of the population is that sometimes "those ... 25 years that were added to life expectancy sometimes ended up -as years in which people became increasingly isolated, lost their physical and mental health and generally were sad and depressed and poor.

"The challenge that we want to talk about as a government is to make sure that those 25 years as far as possible, remain good years. That people remain healthy active,  (and) connected to their communities," Mr Butler said.

Ms Patetsos said that the model of aged care was moving towards consumer-directed care, focusing on choice, control and better access to care through a gateway. Home care and residential care would become more integrated with a greater focus on links with the community and recreational sectors.

This would require providers to shed lazy assets, to become workforce focussed and to secure a larger, skilled workforce through better pay, she said.

Government would need to allow providers some margin if they were to innovate to provide complex, high quality care, she said.

"The challenge for all of us is to disentangle ageing from the welfare web. We need to foster partnerships with government, other stakeholders and older people - not just for their sake but for our own," she said.

Professor Edwards said three elements would be integral to the success of the positive ageing policy:

• Recognising that the group of older people is as diverse as other cohorts;
• Being mindful that peoples' lives are multidimensional and ensuring that they can continue to be multidimensional as people get older; and
• Allowing older people to have their own voice in the policies and programs that affect them.