Big policy changes are needed during this term of federal government to save the NDIS, says a think tank.
Current reforms of the National Disability Insurance Scheme need to go further to address “design flaws and governance failures”, says the Grattan Institute in a new report – Saving the NDIS.
“Not all people with disability are well served by the scheme, and many miss out altogether. At the same time, the costs of the NDIS have risen far higher and faster than expected, putting pressure on government budgets.”
The issues that now threaten the NDIS “are the result of long-standing failures in scheme design and governance that have come into increasingly stark relief as the program has grown in size and cost”, says the report.
The scheme – which was established in 2013 and is funded through contributions from both the Australian Government and state and territory governments – has grown “too big, too fast”, say the report’s authors. The NDIS cost $42 billion in 2023-24 and is expected to cost more than $58 billion by 2028. Growing at about 24 per cent per year on average from 2020-2024, “it is one of the fastest-growing pressures on the federal budget”.
From a purely fiscal perspective, “the level of growth of the NDIS greatly outstrips other comparable areas of spending and will not be sustainable on an ongoing basis in the context of competing pressures across all functions of government,” says the report.
The authors note that the NDIS was the third-largest expense program in the federal budget in 2024, with only support to seniors and revenue assistance to the states and territories costing more. While NDIS costs have spiralled, the increase in spending has not led to better results, says the report.
Governments have begun to act, acknowledge the authors. Legislative and operational reforms initiated by the federal government in its first term aim to reduce cost growth to 8 per cent a year, in line with the 2023 National Cabinet agreement. If successful, these measures could save more than $19 billion over the next four years.
“But there is no guarantee these reforms will succeed, and the current scope of measures is inadequate to deliver the scale of change needed,” says the report. “Even 8 per cent annual growth is untenable in the long term, far exceeding growth in other comparable government programs.”
The current scope of measures is inadequate to deliver the scale of change needed.
To put the NDIS on a stronger footing, four big policy changes are urgently needed over the next three years, say the report’s authors. First, the NDIS needs clearer, firmer boundaries around who the scheme is for and the needs it is intended to meet, so that the right people receive supports.
Second, the way the NDIS sets budgets and manages claims needs to change so funding “is allocated fairly and consistently in a way that is predictable and affordable for governments”. People should have “more choice and more flexibility” in how they use their NDIS funding, say the authors.
Third, governments should establish a strong tier of foundational supports – disability-specific supports outside of individual NDIS packages – to ensure that disabled people get the appropriate supports when and where they need them.
And fourth, Australia needs a new, overarching National Disability Agreement to clarify the relationship between all aspects of the disability policy landscape and to facilitate cooperation and greater accountability between governments.
“The future of the NDIS is at stake,” say the report’s authors. The scheme is “a vital part of Australia’s social fabric – it must be saved.”
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