The Albanese government has announced a new initiative aimed at reforming the National Disability Insurance Scheme (NDIS), a program that has faced escalating costs and scrutiny. Last month, the Minister for Disability Services revealed plans to introduce an alternative program for children with mild autism and other developmental challenges, co-funded by the states starting in 2027. This initiative is seen as a necessary response to the growing financial pressure on Australia’s most costly social program.
In previous years, Labor’s approach to the NDIS has been marked by political maneuvering. In 2021, then-shadow disability services minister Bill Shorten likened the escalating costs of the NDIS to the flawed intelligence that led to the Iraq War. Shorten opposed the former Morrison government’s proposal for independent reassessments of participants’ needs. Following Labor’s victory in the 2022 federal election, Shorten, now the minister overseeing the NDIS, announced plans to cap cost growth at 8 percent annually. However, his initiative has now been overshadowed by the newly proposed “Thriving Kids” program.
The delay in addressing the financial realities of the NDIS has created significant challenges for reform. Community expectations surrounding access to the NDIS have intensified during this period. An analysis from the Liberal Party’s think tank, the Menzies Research Institute, highlights stark disparities in autism diagnoses across Sydney. Children in poorer western and southwestern suburbs are diagnosed at rates up to six times higher than those in more affluent areas.
While it is common to see higher levels of childhood issues in disadvantaged areas, the significant discrepancy in NDIS access rates raises concerns. Psychologist Clare Rowe noted that parents in Sydney’s south are often eager to have their children diagnosed with autism to secure substantial annual funding from the NDIS. This situation highlights a fundamental issue within a scheme initially designed to support a small number of Australians with severe disabilities. The architects of the NDIS claimed it would largely fund itself by facilitating employment for those with disabilities. However, expanding eligibility has resulted in costs exceeding the budgeted $51 billion this year, surpassing projected Medicare spending.
With 70 percent of new participants in the past year being children with autism, Labor’s reforms aim to address a major driver of the NDIS’s increasing costs. The government’s plan to provide tailored support for children with less intensive needs is a step in the right direction. Nonetheless, these changes may not significantly reduce the overall financial burden of the NDIS.
Once entitlements are established, it becomes politically sensitive to withdraw them. Labor’s strategy includes grandfathering existing NDIS participants diagnosed with autism and developmental delays. However, the substantial demand for the scheme, particularly in regions that supported Anthony Albanese in the recent elections, may complicate efforts to limit future eligibility.
Another key factor is the requirement for states to co-fund the new “Thriving Kids” services. Recently, New South Wales Premier Chris Minns indicated he might withhold agreement on the revised system unless the federal government increases funding for public hospitals.
NDIS reform should focus on actual fiscal responsibility rather than merely reallocating taxpayer money among various federal-state silos. With warnings from budget analyst Chris Richardson regarding Australia’s economic challenges, it is crucial to address these fiscal issues. Richardson forecasts that the nation’s living standards will not recover from the post-pandemic downturn until 2037.
Australia’s productivity has suffered, with per-capita GDP declining in nine of the last twelve quarters. The Albanese government’s increased spending on care services, particularly the NDIS, has been linked to this productivity slump, crowding out private investment and growth.
The government asserts that the proposed changes will limit NDIS cost growth to a more manageable 5 to 6 percent annually. However, this figure remains high considering Labor’s lack of commitment to stringent budgetary discipline, as demonstrated by Treasurer Jim Chalmers at a recent Economic Reform Roundtable, where he rejected the need for strict budget rules.
Labor’s late-stage reform to limit NDIS eligibility for children should serve as a foundation for further significant changes. Future adjustments must consider the benefits received by current participants and revisit the idea of independent assessments to ensure that support remains adequate, appropriate, and financially sustainable.
