Labor will make slowing growth in the $50 billion National Disability Insurance Scheme a centrepiece of its budget savings as the war in the Middle East continues to heap pressure on households and the government’s bottom line.
Australia’s peak body for disability services has started priming NDIS providers to expect significant changes next month, but it is encouraging the sector to embrace public debate over the future of a scheme it says has enough funding but is riddled with integrity failures.
Their argument will help bolster Health Minister Mark Butler’s case as he mulls structural overhauls of NDIS eligibility or how the scheme funds services in his efforts to significantly curtail the scheme’s growth trajectory within the next few years.
Savings delivered from driving down NDIS forecasts over the four-year forward estimates – which this masthead revealed last month would be baked into the budget – have become more important as the war in Iran has created uncertainty and thrown off some of the government’s other plans.
Labor has been reconsidering its plans to axe electric vehicle concessions and to introduce a road user charge. The fuel excise cut introduced last week will cost a further $2.5 billion in a budget that Treasurer Jim Chalmers is framing as one of “hard decisions”.
The NDIS has become the federal government’s second-fastest growing budget expense, next to the growing interest bill for national debt, and senior Labor ministers fear the scheme will lose its social licence if it isn’t significantly reworked.
A stricter registration regime and more disciplined pricing are among other options being developed to restore integrity in the program, where most providers are not registered as the scheme has swelled to serve more than 760,000 participants.
While the scheme’s annual growth rate has come down from about 22 per cent when Labor came into power to 10.3 per cent in the most recent quarter, it remains far steeper than any other social program. The NDIS is on track to cost $100 billion by next decade.
State and federal governments have agreed to bring down the NDIS growth rate to 5 to 6 per cent or lower. The new Thriving Kids scheme will start diverting children with mild or moderate needs from the NDIS in 2028, but further changes will be needed to achieve the lower targets.
In remarks that emphasise the significance of the coming reforms, the head of National Disability Services has told its 1000 member organisations, who service more than 300,000 people, to expect that consequential decisions about the NDIS will be made in May and that “this moment should be embraced”.
“For providers, this debate is long overdue. Members see integrity failures every day,” the peak body’s chief executive, Michael Perusco, wrote in an email to members seen by this masthead.
“You have raised these issues for years while operating in a system with weak guardrails, uneven oversight and blunt pricing settings that do not reward quality or accountability.
“There is sufficient money in the scheme. The central question is how to get value for money from this investment while safeguarding participants, providers and the scheme itself. Inaction is not cost neutral.”
Butler last week told a healthcare summit hosted by the Australian Financial Review that the government was working through its options ahead of next month’s budget.
“The scheme is off track. It lacks those disciplined design features of a good social program, and we’re determined to get it back on track,” he said.
“You can have fewer people on the scheme; you can have relatively the same number of people on the scheme with lower cost growth. And I think our job now is to work through all of those different permutations and assess the pros and cons of each of them.
“State, territory and the federal government agree that we need further moderation of growth to get it down to … 5 to 6 per cent or lower, and that is the work that obviously we’re considering in the budget now.”
Butler said it was important the government worked in tandem with the disability community. “This scheme is very much founded on the idea of nothing about us without us. It will have to be that process of co-design,” he said.
“But getting the thing back on track is not just important from an overall budget perspective. It’s really important … for the social licence for this program.”
A Labor-led parliamentary committee is also preparing to hear fresh evidence of fraud and non-compliance in the scheme. It will make recommendations that build the government’s case for an integrity crackdown.
Perusco said the government’s messaging made it clear that changes were under way, while “fraud, misuse and ‘dodgy providers’ have become a central feature of the public debate in recent weeks”.
“Budget pressures, exacerbated by geopolitical uncertainty, inflation risks and the need to constrain government expenditure, make it likely that this year’s budget will include consequential decisions about the future of the NDIS,” he told members.
But he said it was vital the government embarked on structural reform rather than short-term cuts that undermined the scheme’s quality.
“The integrity challenges in the scheme are not accidental,” he said. “They are the predictable result of a market where only around 6 per cent of providers are registered and subject to meaningful safeguarding obligations, while large and growing parts of the market operate with minimal oversight.”
With Paul Sakkal
Natassia Chrysanthos is Federal Political Correspondent. She has previously reported on immigration, health, social issues and the NDIS from Parliament House in Canberra.Connect via X or email.