Prime Minister Scott Morrison says it will help families be more confident about the quality of care provided to their loved ones.
It comes after audits from the Aged Care Quality Agency revealed a 177 per cent increase in the number of aged-care homes where a serious risk was identified in the past financial year.
There was also almost a tripling in the number of facilities that refused to comply with rules.
Mr Morrison says his Government is working hard to achieve quality care for older Australians.
"(It's) my decision, together with my Cabinet, to initiate a royal commission into the aged-care sector, which includes, I stress, young people living with disabilities in aged care. This just a further demonstration of the fact that we're focused on what matters to Australians. This is one of the toughest decisions any Australian has to make on behalf of loved ones who put their complete trust in them. I want them to have that confidence. I want us to not fight about this issue. I want us to fix it. We're going to keep investing strongly in aged care."
The move comes after the Government committed $106 million last week (sept 12) towards improving safety and training within elderly residential homes.
That involves legislation to establish the Aged Care Quality and Safety Commission, a new regulator to audit and assess providers and respond to complaints.
But Labor says Scott Morrison has been cutting funding to aged care since he started as Treasurer in 2015.
Health Minister Greg Hunt has told the ABC the facts show Government spending on aged care increased in the last budget.
The Council on the Ageing, or COTA ((KO-tuh)) Australia, is a policy-development and advocacy group for older Australians.
Mr Yates says COTA Australia welcomes the announcement of a royal commission.
He says the inquiry needs to expose the problems in the sector, what the barriers are to effective care and what funding is needed to run a better system.
The inquiry was sparked after widespread and systemic elder abuse was uncovered at the Oakden aged-care facility in South Australia.
One patient at the centre, 66-year-old Bob Spriggs, was over-medicated and suffered severe bruising during his time at the facility in 2016.
His family lodged a complaint with the state government, which led to a state and federal investigation.
The royal commission will also look at young people living with disabilities at aged-care centres.
