Fixing a broken NDIS will lift productivity
Successive governments share collective blame for failing to act on repeated warnings that without changing NDIS eligibility rules – in particular around mild autism – the $46.3bn disability scheme would blow up the budget and fail to provide the right support system for our kids.
On the eve of Jim Chalmers’ economic reform roundtable discussing budget sustainability and tax reform on Thursday, NDIS Minister Mark Butler announced changes to the scheme’s eligibility that would take pressure off the budget and end a “cash for diagnosis” culture.
Anthony Albanese has taken a major first step in using the mandate from his dominant 94-seat election victory to tackle a deeply sensitive and politically challenging issue that governments have been unable to address.
The shake-up was not taken to voters before the May 3 election but it is the right decision, done early, and without needing another review into a review.
While the Albanese government has lowered the rate of expansion in the NDIS, driving growth well below Labor’s annual 8 per cent target from mid-2026 would be near-impossible without changing eligibility rules.
Butler, one of the Prime Minister’s closest allies and friends, on Wednesday acknowledged the decision to establish a $2bn ‘Thriving Kids’ program and divert children off the NDIS would be “hard for some parents to hear”. The program could be followed by other “foundational support” systems taking pressure off the NDIS, including one for adults with severe and complex mental illness.
An NDIS quarterly report released last week revealed the number of young children on the scheme had surged in the six months to June 30, with 10.2 per cent of boys and girls aged 5 and 7 on the disability scheme.
Rapid growth in children on the NDIS has resulted in 16 per cent of all 6-year-old boys on the scheme.
After constant growth year on year, there are now at least 740,000 participants with approved NDIS plans. Of the almost 98,240 “entering and receiving a plan” in 2024-25, 69 per cent were children aged under 15.
Professor Frank Oberklaid, who will co-chair the design process of Thriving Kids with Butler, said there was too much “inconsistency” in the system.
The respected pediatrician and childhood development expert said change was required to end the era of one child who needs support missing out and another with mild autism getting “buckets loads of cash”.
The fiscal implications of allowing the NDIS to grow unfettered are alarming.
The government has warned the NDIS is on track to cost $105bn and increase its share of GDP by 0.5 per cent by 2034-35, which is the equivalent of growth in defence, aged care and Medicare combined.
Chalmers, who was told by Treasury after the election that lower government spending and higher taxes were required to balance the budget, is facing other spiralling care economy cost pressures.
Medicare is projected to grow by 5.6 per cent per year, childcare costs will rise 5.1 per cent per annum and aged care costs will jump by at least 5.2 per cent annually.
The flip side of reining in unsustainable NDIS growth is that it will cost many billions of dollars to provide alternative supports.
In December 2023, Albanese pledged a massive payday for the states including GST top-ups and tens of billions of dollars in healthcare, after striking a deal in which premiers and chief ministers would co-fund “foundational supports” for disabled people who no longer qualified for the NDIS, including kids with early developmental challenges and mild autism.
Almost two years on, the Albanese government is initially going it alone.
Butler on Wednesday confirmed negotiations on the 50-50 funding split deal agreed to by national cabinet had “drifted”.
Ahead of the 2022 election, Albanese pledged to pursue Federation reform to end differences and improve cohesion between governments. After winning 94-seats, Albanese must deliver on that commitment because the federal government can’t keep paying for everything.
Reality for ALP as coal will be needed until 2049
The rapid explosion of children moving on to the NDIS is a national shame that threatens our long-term productivity and prosperity.