Interesting that TFR is trying to bring DSP and carer payments into the NDIS funding debate.
Total disability spending to hit $100b despite NDIS cuts
The Albanese government will increase total spending on disability to $98 billion this year despite efforts to slow the runaway growth of the National Disability Insurance Scheme, as payments to support pensions for people who cannot work and to carers continue to rise.
While Labor has focused on ambitious targets to cut NDIS growth to achieve more than half of the projected federal budget savings over the next four years, other forms of disability aid will also make up a significant portion of government spending.
The government’s projected NDIS spending for fiscal 2027 is $56.1 billion, while financial support for people with disability at $27.6 billion, and financial aid to carers is $13.97 billion.
New laws would give Health Minister Mark Butler powers to make broad cuts to the NDIS.
A large portion of these payments relates to support through the Department of Social Services in the form of pensions and help to fund everyday living costs such as rent and groceries, which the NDIS does not pay for. Cutting those payments, which cover essential day-to-day living expenses such as housing, is not seen as an option.
Total estimated disability spend rose is $98.1 billion compared to $93.4 billion in the 2026 fiscal year, an increase of $4.7 billion, federal budget papers show. This will increase by another $5 billion to $103.4 billion by fiscal 2030, even if NDIS growth tapers off as projected.
The projections confirm Australia as one of the highest spending nations in the world on disability supports, only outranked by Scandinavian nations.
Australia’s public spending on incapacity exceeds 3 per cent of GDP, according to Organisation for Economic Co-operation and Development data, compared to around 2.5 per cent a decade ago when it was on par with many other wealthy nations.
The theory behind the establishment of the NDIS was that it would increase workforce participation and support carers to return to work, which would save the government money on pension and carer payments.
However, those pension and carer payments have continued to increase year-on-year because more people are seeking disability aid, although not at the same rate as the NDIS.
There is growing scepticism about whether Labor can achieve its target to reduce NDIS growth from 11.3 per cent to an average of 2 per cent over the next four years, before settling at 5 per cent. The projected $38 billion of savings over four years, estimated to total $185 billion over a decade, are central to the government’s long-term budget repair.
However, Labor is bracing for a backlash from the disability sector as it prepares to make the tough choices necessary to rein in spending, while it must also bring the states on board to fund community-based services such as Thriving Kids for children with autism.
Labor on Tuesday confirmed it would delay moves to introduce price caps for the aged care sector and introduce tougher penalties against providers overcharging for support at home services as it seeks to avoid a repeat of the NDIS model.
“I’ve seen that in the NDIS where pretty much everyone charges at the price cap in spite of that being something that was intended to drive competition in the sector. We don’t want to set in place a price cap that really leads to unintended consequences, particularly that see prices go up,” Health Minister Mark Butler told ABC Radio.
Michael Brennan, chief executive of the e61 Institute and a former senior Treasury official, warns the recent history of NDIS cost revisions is not encouraging. Even if the program grew by 5 per cent over the forward estimates and then reverted to 7 per cent, the current projected surplus of $19 billion in fiscal 2036 would entirely disappear.
The e61 Institute estimates a significant portion of the early NDIS savings will come from a reduction in budget allocations for so-called social, civic and community participation supports, as well as tighter eligibility rules from 2028 which could hit participants with autism, psychosocial disability, and milder intellectual disability hardest.
Those three groups account for roughly $26 billion of annual NDIS spending.
David Cullen, who was chief economist and head of pricing at the National Disability Insurance Agency from 2016 to 2022, said legislation introduced last week to give the health minister sweeping powers to make deep cuts to parts of the scheme meant the targets were achievable, but could come at a cost.
“You could get it (scheme growth) to zero under the new act but not without doing a hell of a lot of harm to people,” Cullen said.
“I’m hoping the bigger plans won’t be cut too much. You don’t get these savings by cutting the big plans, you get the savings by reducing 100,000 people on $10,000 plans.”
Stephen Anthony, a former Treasury official who chaired the government’s review into NDIS pricing, said there was a risk of shifting the cost savings to other parts of the federal budget and the states. He wants the government to implement a proposed digital payments platform which would vet every payment and help stop rorting.
“If you structure the pricing correctly and put in place the payments platform and the digital supermarket, it doesn’t cost anything, but it does improve pricing within the market and help to illuminate sharp pricing and fraud,” he said.
“It is a microeconomic reform of great significance, and it is all ready to go.”
One of the scheme’s largest providers, Kismet, which has rolled out its own digital payments platform, also said the government should adopt existing technology to streamline the system which still relies on paper invoices rather than trying to roll out its own.
“No one should underestimate the scale of the delivery challenge. The key is to work with industry and use the technology that already exists in the market,” Kismet co-founder and chief executive Mark Woodland said.
“I worry that a brand new, bespoke system will not be delivered in the timeframe required to power these reforms.”
Shadow NDIS minister Melissa McIntosh said Labor had a history of failing to meet NDIS growth targets.
“The Albanese Labor government are masters at setting arbitrary targets they never achieve in order to make the books look better,” McIntosh said.
“In 2023, they set an annual growth target of eight per cent, last year they revised that target to five per cent and now two per cent, yet the actual growth in the scheme is still at 10.3 per cent.”
However, Labor will argue it reduced the scheme’s growth from 22 per cent under the Coalition to 10 per cent.
Labor last week introduced legislation that tightens eligibility criteria and is expected to slash the number of participants on the scheme.
Butler will have sweeping powers under the bill, which will first be subject to a Senate inquiry to cut some sections of the scheme. The government has pledged to slash $38 billion from the runaway program in four years.