EDITORIAL: Chalmers must make hard call on cutting NDIS cost

With the Federal Budget due in a little over three weeks the lights will be burning late into the night at Treasury.

The war in the Middle East has upended global economies. Treasurer Jim Chalmers acknowledged on Monday after returning from a meeting with G20 finance ministers that the Australian economy was in many ways “hostage” to decisions taken in Tehran and Washington.

“The consequences of this war in the Middle East are already serious, and there is still a risk that they become severe,” he said.

The Government had been forced to rethink the Budget savings package, he said. “It will be focused on resilience and reform. There’ll be tax reform, there will be a productivity push and there will be savings,” he said.

There remains scepticism about the Government’s version of what constitutes savings — whether it means actually reducing spending or whether it means redirecting spending.

But putting that aside, economists were warning even before the war that government spending was a major contributor to inflation which the Reserve Bank of Australia tried to drag back by increasing interest rates.

The RBA has lifted interest rates twice this year and inflation is running at 3.7 per cent, well above the bank’s preferred 2 to 3 per cent target range. The bank and Dr Chalmers have already signalled they are bracing for inflation to soar to 5 per cent this year for the first time since 2023.

There is talk of stagflation — simultaneously high inflation and unemployment — and although Dr Chalmers last week talked down the prospect of a recession, the word remains part of the debate.

As Dr Chalmers reviews his Budget plan, one area which must remain at the top of the savings list is the National Disability Insurance Scheme. The NDIS costs taxpayers $50bn per year and that is expected grow to $100bn within a decade.

“Even the biggest supporters of the NDIS would acknowledge that the growth in spending on the NDIS is beyond what Australians can afford,” Dr Chalmers said on Monday ahead of discussions with State and Federal counterparts.

He conceded the NDIS was “easily the most important part of the savings package”.

The NDIS year-on-year growth rate had hit 22 per cent in 2021–22. Former minister Bill Shorten tried to wrestle down the spiralling cost with reforms aimed at containing the increase to 8 per cent annually.

But this month NDIS Minister Mark Butler said it remained “off track” and lacking “disciplined design”. The scheme’s cost growth remains at about a still unsustainable 10 per cent. Dr Chalmers needs to act on the ballooning cost. Dodgy NDIS providers who have drained taxpayers for too long must be brought into line.

The Government talks a big game on intergenerational fairness. Failure to rein in the NDIS for good will just shift the cost onto future generations. That is anything but fair. Dr Chalmers needs to take the hard decisions required.