NDIS changes to be unveiled on Wednesday will provide budget’s biggest cuts

The Albanese government on Wednesday will unveil the biggest source of cuts in the May 12 budget, when it announces a sweeping overhaul of the National Disability Insurance Scheme.

It wants to get the $49 billion-a-year scheme, now growing at 10% annually, down to a growth rate of about 5%.

Minister for the NDIS Mark Butler will announce the changes now not just to prevent the bad news overshadowing the budget, but to give the government an opportunity to manage stakeholders, especially the states. On Tuesday Treasurer Jim Chalmers will meet his state counterparts in a video conference to discuss the Commonwealth’s plans.

Previously, federal NDIS changes have run into resistance from the states, which have to take up more responsibility for disability as the Commonwealth cuts back.

Chalmers told a Monday news conference:“The NDIS is growing too fast for Australians to afford.” Without change, it would reach a cost of $62 billion annually in 2028-29, he said.

Chalmers said overhauling the NDIS had been “a really big part of our pre-budget deliberations”.

“It is easily the most important part of the savings package that we will present on budget night. There have been many, many hours of deliberation”.

Chalmers has been determined to use the opportunity of this budget – the first of the parliamentary term – to get NDIS spending under control. Those lobbying Butler about the scheme in recent weeks have been left with the firm impression that strong pressure for cuts was coming from above.

An earlier round of reforms was produced by former minister Bill Shorten. Shorten, a driving force behind the scheme originally, and now Vice-Chancellor at the University of Canberra, wrote in The Australian last week: “Australians […] know the NDIS matters, they value it and they don’t want it trashed. The message is clear – the scheme needs to be sustainable, but it must be strengthened, not torn down.”

The reforms are expected to reduce the large number of children going on to the NDIS for developmental delays, make a fresh attack on fraud, rorts, and overcharging, and tackle the registration of providers.

Chalmers, who has just returned from the G20 finance consultations in Washington, said “we’re now into the home stretch of the budget preparations,” although there was sill a lot to finalise.

He indicated the budget’s total savings package would not be as big as envisaged in January or February, given the havoc the Middle East conflict was causing in the global economy, “but it will still be substantial”.

He said the fuel excise cut the government made to ease the burden of the fuel crisis would be “one of the bigger new spending items in the budget”.

“This budget will be a responsible budget. It will be focused on resilience and reform. There’ll be tax reform, there’ll be a productivity push, and there will be savings.

"Cutting compliance costs is a big focus of the government and a big focus of the budget as well.”

Chalmers pointed to likely changes in taxes affecting housing. Changes are expected to the capital gains tax discount and probably to negative gearing.

Chalmers indicated decisions were yet to be made, but said “I think the housing market is where some of those intergenerational issues are most obvious. We are working through a range of options to see if we can deal with them or address them in a responsible way”.

It is not yet clear whether the government will respond to the strong political pressure to have some sort of extra tax on the profits coming from increased prices for Australian gas exports, coming as a result of the Middle East crisis.

The budget is set to show growth slowing and unemployment rising. Chalmers said while it would have only one set of bottom lines, “we are in discussions right now about how we describe a downside scenario, a situation that plays out worse than the central case”.

Days before the budget the May 9 Farrer byelection, for the seat of former Liberal leader Sussan Ley, is expected to bring bad news for the Coalition.

The Liberals and Nationals, each almost certain of defeat in the New South Wales seat, have joined forces to promise money for a hospital for Albury and cleaner water for the town of Narrandera.

At the weekend Liberal leader Angus Taylor and Nationals leader Matt Canavan promised $200 million to deliver a healthcare package centred on Albury-Wodonga including “kicking off work on a new hospital”.

On Monday the two parties promised $16 million towards the construction of a new water treatment plant to deal with poor water quality in Narrandera.

The joint campaign promises come despite the two parties being competitors for votes.

The promises are largely theoretical, given they could only be delivered if the Coalition won the next election, due in 2028, which appears unlikely given the size of Labor’s majority.

On present indications the Farrer contest is between independent Michelle Milthorpe and One Nation’s David Farley.

Preferences will be crucial.