The Aged Care Association says chonic underfunding of the sector means some rest home operators may struggle to maintain the quality of care for the elderly.
The sector says a one percent increase offered by the Government does not cover rises in Kiwisaver contributions, the minimum wage and the cost of food and electricity.
The sssociation says the sector wants a 7-point-6 percent increase.
Chief executive, Martin Taylor told Morning Report that if sufficient funding is not obtained, it will be hard to retain the quality of life for elderly and it is likely the sector will be unable to provide an increase in pay for low-paid caregivers this year.
Mr Taylor said the Prime Minister should honour a commitment made in 2012 to increase funding once the economy moved back into surplus.