NDIS ‘unsustainable’ and ‘out of control’: Wayne Swan

Michael ReadEconomics correspondent

Jun 28, 2024 – 11.05am

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Former treasurer Wayne Swan has warned the National Disability Insurance Scheme is “unsustainable” and “running out of control”, putting the rapidly growing social program at risk of losing community support.

The independent budget watchdog expects the $42 billion program to overtake the age pension as the most expensive area of government spending within a decade, even if Labor successfully cuts the scheme’s annual growth rate to 8 per cent from 20 per cent, The Australian Financial Review revealed on Friday.

The cost of the NDIS will exceed the age pension in just three years if it continues to grow at 20 per cent per year.

Mr Swan on Friday said the scheme was “absolutely” unsustainable.

“And if it remains unsustainable, then we probably lose the lot at some stage into the future because it will lose critical public support. That’s the problem,” he told Nine’s Today program.

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As the treasurer in the Gillard government, Mr Swan was one of the architects of the NDIS. When the program was legislated, Mr Swan claimed to have fully funded it through a range of measures, including raising the Medicare Levy by 0.5 percentage points.

The NDIS was originally expected to cost about $13 billion per year, but repeated budget blowouts have resulted in its annual running cost surging past the aged care system ($36 billion), Medicare ($32 billion), federal government funding for hospitals ($30 billion) and the pharmaceutical benefits scheme ($20 billion).

Including departmental expenses, the NDIS cost the federal and state governments $44.3 billion last financial year, rising to $48.8 billion in 2024-25.

Mr Swan said there was “a huge unmet need out there, but it’s been running out of control”.

“It ran out of control over the last five or six years, and it needs to be brought under control.”

Overhaul blocked

Labor’s attempts to cut the annual growth rate of the NDIS to 8 per cent from 20 per cent hit a roadblock this week after the Coalition and Greens teamed up in the Senate to send the government’s overhaul legislation back to a second public hearing process.

Disability Minister Bill Shorten said the eight-week delay amounted to $1.1 billion of taxpayers’ money, describing it as a pointless exercise given the Senate had already heard from all relevant stakeholders and the Coalition was going to support the legislation anyway.

“Why are we going to do a circle jerk-around stuff which has already been established and provided,” Mr Shorten told reporters on Thursday, as he launched a website counting the cost of the delay down to the second.

Mr Swan said it was “a deeply irresponsible decision in the Senate to knock back the government’s plans to rein in spending on this very important scheme”.

“I don’t see how the Greens and the Liberals could simply vote down important measures to get spending under control.”

Mr Shorten’s legislation aims to bring NDIS growth down to 8 per cent a year in part by ending the practice of automatically topping up NDIS participant plans when they hit their limit. Mr Shorten said two-thirds of top-ups were not for legitimate reasons.

The Parliamentary Budget Office’s baseline projection for the NDIS to cost more than the age pension in 2034-35 is effectively a best-case scenario and assumes Mr Shorten achieves his target of reducing the NDIS’ annual growth rate from 20 per cent to 8 per cent by 2026.

But this projection may be too optimistic, given the NDIS has outgrown Treasury’s forecasts for several years.

Under the PBO’s high-growth scenario, which envisages the NDIS budget expanding at 10 per cent per year from 2026 instead of 8 per cent, the NDIS would overtake the age pension in 2030-31 at an annual running cost of about $82 billion.

About 2.6 million over-65s receive the age pension, while 650,000 people are NDIS participants.

Mr Shorten on Friday said the NDIS was sustainable “but we’ve all got to join in to make it sustainable for the future”.

Appearing alongside Mr Swan, independent MP Sophie Scamps said the NDIS was “unsustainable in its current form” and called for the states to step up and spend more on disability services.

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