Labor hails lower budget deficit as Treasury keeps NDIS modelling cuts ‘secret’

Labor has posted a $10bn budget deficit, its first since returning to power, as NDIS modelling is kept secret over fear it would damage negotiations with the states.

Modelling on how to cut spending to the NDIS is being kept under wraps.

Labor has revealed its first deficit since returning to power has landed at $10bn, as Treasury keeps secret its contentious modelling on how to cut spending in the budget’s biggest item – the National Disability Insurance Scheme.

Jim Chalmers and Finance Minister Katy Gallagher will release figures showing 2024-25 was the Albanese government’s first deficit, although it has come in far lower than the $27.9bn deficit forecast ahead of the May election.

The government is attributing the budget improvement to lower-than-expected unemployment and strong wages growth.

The Treasurer said the deficit was about a fifth of what was forecast before the 2022 election, declaring “responsible economic management is the hallmark of the Albanese government”.

“We’ve turned two big Liberal deficits into two substantial Labor surpluses in our first two years, significantly reduced the deficit in our third year, and continued to pay down debt,” Dr Chalmers said.

Labor has banked 70 per cent of revenue upgrades since it was elected, although this has fallen from 95 per cent in 2022-23 and 88 per cent by December 2024.

Senator Gallagher said a “key reason for the better revenue result is that more Australians are in secure jobs, earning higher wages”.

But with the long-term health of the budget depending on bringing down the yearly spending growth of the NDIS to 4-5 per cent, Treasury is refusing to release its modelling of cutting costs on the scheme over fear it would damage negotiations with the states.

This is despite Treasury identifying four documents that contained relevant modelling and advice, as Health Minister Mark Butler comes under pressure to use existing NDIS funding to set up supports outside the scheme in the face of stalled negotiations with the states.

According to the response to a Freedom of Information request by The Australian, the release of material would go “against public interest” and disrupt nearly two years of negotiations between state and federal governments on NDIS reform.

“There is a substantial public interest in preserving good relations with the governments of the states and territories, and enabling the commonwealth in being able to make important investment decisions without undue impediment,” Treasury assistant secretary Adam Bogiatzis said.

While states and territories signed up in principle to an overhaul of the NDIS in 2023 that would set up a new system of services outside the scheme – known as foundational supports – for those with milder disabilities, they are yet to commit specific dollar figures.

Premiers also lashed the federal government’s announcement last month of the $2bn Thriving Kids program, which will be the first tranche of the foundational supports initiative and aimed at servicing children with mild to moderate autism.

Liberal and Labor state governments alike accused Mr Butler of failing to consult them before unveiling the $2bn in funding – which he said he expected states to match – and said the announcement was “a significant change from the December 2023 national cabinet agreement”.

As the protracted negotiations continue – which also rely on a new deal on the National Health Reform Agreement being landed – Grattan Institute disability program director Sam Bennett said the commonwealth needed to raid existing NDIS funding to set up foundational supports, rather than trying to find new money.

“One of the reasons why foundational supports has been stalled for about 21 months is that the current plan involves governments finding new money. Obviously it’s been tied up together with the negotiation on hospital funding, that makes it very complicated in the current fiscal environment,” he told The Australian.

“The conversations we’ve had don’t give us a huge amount of confidence … they’re really struggling to find new money to throw at this.

“But you don’t need a new set of bilateral agreements between both levels of government about how new funding could be used. It isn’t the amount of money in the system that is the problem, it is how it is currently allocated. Governments should use their existing funding commitments through the NDIS to fund foundational supports.”

According to modelling by the Grattan Institute, about 165,000 children with mild to moderate autism should have their needs met outside the NDIS.

However, Mr Bennett warned that the $2bn in federal funding fell well short of what was needed to set up a program large enough to do this, even if states matched the contribution.

“The quantum of dollars could be a problem, because $2bn from the commonwealth over four years … that’s $500m a year. If the states do match it, dollar for dollar, $1bn a year,” he said.

“The funding that would be needed for a really robust system being about three times that, $3bn a year.

“The funding should come out of the NDIS so that, basically, over a period of time, funding from within the existing NDIS budget should be redirected to a commissioning pool that could be used to commission foundational supports.”

The Albanese government moved to rein in the growth of the NDIS soon after winning office in 2022, in the face of projections that the scheme would blow out to more than $100bn a year without intervention.

Then NDIS minister Bill Shorten described the desire to get the scheme’s growth to 8 per cent was a “target not a cap”, amid outcry from disability advocates over what they saw as scheme cuts.

Despite Mr Shorten and other Labor ministers denying for years that there would be changes to eligibility to reach this target, Mr Butler in August revealed the government would in fact look to reduce access to the scheme for children with mild to moderate developmental delay.

“Access and eligibility changes will be made … once the Thriving Kids program is fully rolled out (in 2027),” he said.

Following this further wave of reform, Mr Butler confirmed the government would look to reduce the scheme’s growth to 4-5 per cent annually.

The refusal by Treasury to release the documents underpinning this new growth target comes as the Albanese government seeks to tighten FOI laws by throwing up barriers to stem the flow of requests, claiming thousands of FOI requests were being made “vexatiously”.

As part of the announcement Attorney-General Michelle Rowland said she wanted to “remove barriers to frank and fearless advice from the public service by ensuring the test for accessing deliberative documents is clearer in law and easily understood”.

In other words, access to deliberative advice from the public service needed to be limited to ensure the government was being given the best advice, even if that was controversial.

However, the FOI exemption to deliberative documents is already being frequently cited as a reason not to release information, with Treasury’s refusal to publish documents requested by The Australian also justified because of “the importance of agencies being able to develop recommendations and advice on core issues of significance to the government and the Australian people in a confidential environment”.