Dr Luke Buckmaster, Social
The National Disability Insurance Scheme (NDIS) is being introduced across Australia from July 2016, at a cost of around $22 billion by 2019. How does the Commonwealth plan to pay for its share?
What is the NDIS?
provides support to people with disability, their families and carers. It is jointly governed and funded by the Commonwealth and participating
states and territories. The NDIS is being introduced
across Australia from July 2016, except
in Western Australia where it is still being trialled.
The main component of the NDIS is individualised,
long-term funding to provide support for people aged under 65-years with
permanent and significant disability, or eligible for early intervention
support. Participants meet with the National
Disability Insurance Agency to identify a set of supports agreed as
‘reasonable and necessary’ to meet their goals. They are provided with funding
for these supports and can choose how their needs are met.
When the NDIS is fully implemented in 2019, it is
expected that around 460,000 Australians will receive individualised supports.
The NDIS also has a broader role in helping people
with disability to access mainstream services and community services, and to maintain
informal supports (such as family and friends).
This NDIS is not means tested. Like many other
Commonwealth social policy programs—such as Medicare, the Pharmaceutical
Benefits Scheme and income support payments—the NDIS is an uncapped
How much will it cost?
The cost of the NDIS will increase
substantially over the next four years while it is progressively introduced:
from around $4.2 billion in 2016–17 to $21.5 billion in 2019–20—representing an increase in spending to around 1.1 per cent
of GDP. It is important to note, however, that the Commonwealth will only be
responsible for half of the annual cost of the scheme.
The most recent NDIA
annual report projects that expenditure will increase gradually to 1.3 per cent
of GDP in 2044–45, reflecting the increased cost of supports as NDIS participants
age over time.
In its 2011 report recommending the introduction of the NDIS,
the Productivity Commission suggested that the benefits of the NDIS would
outweigh the costs and add almost 1 per cent to Australia’s GDP.
Why the funding
source is important
Funding for disability has long been the subject of debates about
cost and blame shifting between the Commonwealth and the states and territories.
Guaranteed future funding for disability services was part of the rationale for
The Productivity Commission noted
that ‘current funding for disability is subject to the vagaries of governments’
budget cycles’ and proposed that the Commonwealth should finance the entire
costs of the scheme from general revenue, or a levy ‘hypothecated to the full
revenue needs of the NDIS’.
How is the NDIS being funded?
The method of financing agreed between the Commonwealth (Gillard)
and state and territory governments is different to the two main approaches
proposed by the Productivity Commission. Participating governments jointly
provide funding based on intergovernmental agreements. Funding comes from a
combination of sources.
First, existing money spent by Commonwealth, state and territory
governments on disability services is being redirected to the NDIS. According
to the 2016 Report on Government Services, 29.7 per cent
of the $8.0 billion spent on disability services in 2014–15 came from the Commonwealth.
In addition, funds for the NDIS are taken from the July 2014 increase to the Medicare
levy (from 1.5 to 2 per cent of taxable income). Revenue raised from
increasing the Medicare levy is directed to a special fund—the DisabilityCare Australia Fund—for the purposes of
reimbursing governments for NDIS expenditure. In contrast to
the Productivity Commission model, the increased Medicare levy is not designed
to meet the full revenue needs of the scheme (just as the levy only partially
covers the annual cost of Medicare).
Finally, any NDIS funding not offset by the above
sources must come from general budget revenue or borrowings. As the
Parliamentary Library noted
previously, the reliance on multiple sources creates ‘some risk of
future instability of financing’ for the NDIS.
Funding from 2019
The Commonwealth Government’s share of NDIS
expenditure in 2019 is expected to be
around $11.2 billion. The Government says
that around $6.8 billion of this will come from the redirection of
existing disability funding and the Commonwealth’s share of the DisabilityCare
Australia Fund, leaving $4.4 billion to be sourced elsewhere.
The Government has proposed
that this additional amount should come from budget savings directed to a
special account—the NDIS Savings Fund—which will ‘hold NDIS
underspends, and selected saves from across the Government’. While savings may
come from any portfolio, all savings proposed
so far have been from the social services portfolio. Legislation
to establish the NDIS Savings Fund lapsed with the dissolution of the 44th Parliament.
To the extent that it cannot be funded from these sources, the
Commonwealth’s contribution will be a cost to the Budget—as are most other
Government programs that do not have dedicated funding sources.
L Buckmaster and J Tomaras, National Disability Insurance Scheme Bill 2012, Bills digest, 72, 2012–13, Parliamentary Library, Canberra, 2013.
T Dale and L Buckmaster, ‘Funding the National Disability Insurance Scheme
’, Budget Review 2015–16
, Research paper series, 2015–16, Parliamentary Library, Canberra, 2015.
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