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Fearful politicians put finances at risk

Recently, the UK media was filled with pictures of the Chancellor of the Exchequer (same role as our Treasurer) Rachel Reeves in tears on the floor of the Parliament. Why was she crying? No one was saying, but the tears rolled down her cheeks as PM Keir Starmer was delivering a massive U-turn in his Labour government policy.

PM Starmer shelved a plan to cut disability payments following a rebellion by Labour’s backbenchers. The U-turn raised the prospect of the government hiking taxes or issuing more debt to fund its welfare system. It also cast doubt over the future of Rachel Reeves, who took the job a year ago promising a return to economic stability in Britain by sticking to strict spending rules.

Markets reacted savagely: investors sold off British government bonds and the pound fell sharply. UK government bonds tumbled in price, sending the yield on 10-year gilts up 0.12% to 4.58%. Markets are fearful that the Labour government has abandoned plans to cut ballooning and unsustainable welfare costs.

The UK government’s climbdown points to a broader truth for governments across the developed economies, where weak economic growth means countries are struggling to raise enough revenue to pay for rising costs from an ageing population. With voters largely wary of spending cuts, that leaves higher taxes as the most likely outcome.

Britain is already on course to register the highest tax burden since World War II thanks to big spending during the pandemic and paying out for energy subsidies after Russia’s invasion of Ukraine. Meanwhile growth prospects remain soft. The country’s Office for Budget Responsibility says growth could be 1% in 2025 and economists say even this looks optimistic.

The UK’s Labour Party was elected last July with a historically large majority and a mandate to fix the nation’s public finances. Reeves came into office saying her aim was to repair investor trust in Britain’s establishment after former Conservative PM Liz Truss caused a market panic by unveiling unfunded tax cuts in 2022. Truss quickly resigned and her tax cuts reversed. The aftershocks of this policy continued to push up government borrowing costs. But in the ensuing 12 months since its election victory, Labour’s standing in the polls has slumped and it has had to reverse several unpopular benefits cuts to appease left-wing lawmakers who have urged higher taxation instead.

Reeves had said that she will stick by strict fiscal rules, which stipulate that day-to-day spending is matched by tax revenue and that government debt as a percentage of the economy will fall. In March, the cuts to disability payments were hurriedly introduced by the Treasury just before a review of departmental spending was scored by a budget watchdog.

In Britain, the number of people claiming disability or incapacity benefits has risen from 2.8 million in 2019 to 4 million in 2025. Currently around 1 in 10 working age people in Britain are on such benefits. The government aimed to tighten eligibility to bring these numbers down, get more people back into work and save billions of pounds.

But when the government released guidance stating that the cuts to disability payments would push some people into poverty, its backbenchers rebelled.

Will Australia face a similar fate?

PM Albanese’s Labor government was triumphant against a hapless Opposition campaign in the last election, and was not forced to confront serious scrutiny of its fiscal planning. The NDIS is a case in point, similar in many aspects to the UK experience related above.

The National Disability Insurance Scheme (NDIS), launched in 2013, represented a landmark in Australia’s social policy, providing tailored support to individuals with significant and permanent disabilities. However, its escalating costs, structural complexities, and vulnerabilities to fraud raise serious questions about its sustainability and efficacy.

NDIS cost and projected expenditure

In the 2023–24 financial year, the NDIS cost Australia $43.9 billion, a figure that underscores its position as one of the fastest-growing components of the federal budget. Projections indicate this will rise sharply, with estimates suggesting the scheme could reach $50.8 billion in 2025–26 and potentially $58 billion by 2028, assuming the government meets its target of moderating annual growth to 8%. Over the next decade, cumulative expenditure could approach $600 billion if growth trends persist. The scheme’s cost has already surpassed initial projections, which estimated $22 billion annually by 2018, reflecting higher-than-expected participant numbers and service demands.

The chart below illustrates the NDIS’s cost trajectory from 2023–24 to 2028, highlighting the challenge of balancing growth with sustainability.


Source: Grok

As of December 2024, approximately 646,000 individuals accessed the NDIS, a significant increase from 36,000 in 2016, reflecting an 18-fold growth in participation. This surge, averaging $71,000 per participant annually, has driven costs ever upward.

The NDIS faces structural issues that threaten its long-term viability:

  1. Cost escalation and sustainability: the NDIS is financially unsustainable, with costs projected to overtake Medicare and defence spending by 2025. The scheme’s demand-driven nature and higher-than-forecast participant numbers have strained budgets, prompting calls for tighter eligibility criteria.
  2. Inadequate design: the disability community has voiced concerns over insufficient co-design, with changes often implemented without adequate consultation. The 2022 NDIS Act amendments aimed to address this, embedding co-design principles, but critics argue implementation lags.
  3. Bureaucratic complexity and access barriers: the NDIS’s focus on diagnostics over functional needs creates access challenges, particularly for those with less-defined disabilities. Lengthy delays in plan approvals and reviews further exacerbate participant frustration.
  4. Retreat of mainstream services: States and territories have reduced funding for non-NDIS disability programs, forcing individuals to rely on the NDIS, which was not designed to cover all disability support needs. This has inflated costs and strained the scheme’s scope. Fraud is a significant challenge, with estimates suggesting up to $2 billion annually, or nearly 5% of the NDIS budget, is misused, including by organized crime syndicates. Unregistered providers have exploited vague guidelines, claiming up to $20,000 per participant for non-essential services like luxury travel, misusing short-term respite funding. Overcharging is rampant, with providers inflating prices for NDIS participants, a practice dubbed the “disability mark-up.”

Look at the case with autism, a difficult condition to diagnose and one open to “interpretation”. Autism is the most common primary disability for NDIS participants, accounting for 35% of all participants. A significant portion of NDIS participants with autism are children, with a majority being male. The NDIS provides funding for a wide range of supports and services for individuals with autism, including therapies, assistive technology, and support workers. There has been a notable increase in the number of boys aged 5-7 accessing the NDIS, with 11.5% of this age group currently receiving funding. In the opinion of critics, this rate of disability cannot be legitimate.

The government has responded with some legislative reforms, but does the government have the courage to implement the major structural reforms required?

The NDIS remains a cornerstone of Australia’s disability support framework, delivering independence and dignity to hundreds of thousands. However, its financial trajectory, structural inefficiencies, and susceptibility to fraud demand urgent reform. The government’s 2024–25 budget allocates $468 million to bolster evidence-based supports, combat fraud, and improve transparency, but success hinges on effective co-design and robust enforcement. As the NDIS navigates its second decade, balancing fiscal discipline with its foundational promise of empowerment will be critical to its survival.

We would rather not see the Treasurer of Australia in tears on the floor of Parliament as promises are broken, the currency tanks and bond rates surge.

 

Paul Zwi is a Portfolio Strategist at Clime Investment Management Limited, a sponsor of Firstlinks. The information contained in this article is of a general nature only. The author has not taken into account the goals, objectives, or personal circumstances of any person (and is current as at the date of publishing).

For more articles and papers from Clime, click here.

 

25 Comments
Boomer Bob
August 06, 2025

country is done. thank god i'm a boomer.

Graham W
August 04, 2025

The prognosis for many countries with their ever-increasing debt levels is extremely poor as they are locked in to ever increasing spending on myriad forms of welfare. Real wages have been falling for decades, hence demands for wage increases and many government payments.
The average Joe Blow makes no net tax contribution to the government during a whole lifetime, evidence of a system on its last legs it seems to me. Homeowners enjoying the increase in the value of their home think that they are doing OK overall. Will they be able to keep their home in the future if pension and welfare payments cannot be maintained at anywhere near real rates? For folk like Ben, they can have a good life when not relying on government handouts and pensions. However, Ben,take what you can when you can before the house of cards collapses.

Huey
August 04, 2025

Speaking of rorting, I work in the Finance Industry and you'd be surprised (but perhaps you wouldn't be) to see how many NDIS providers are borrowing several million dollars to buy Childcare Centres and other expensive real estate investments - and they have $2m-$3m in cash in their bank accounts for the deposit. And that's on top of the 2 or 3 investment properties they already own. . How come sooo many NDIS providers are making so much money? Something is very wrong somewhere.

KIm
August 03, 2025

What's the point of the luxury NDIS if the country can't defend itself? Doctors are being bullied by parents of children who believe their child has a right to go onto NDIS. When I went to school, all kids seemed to be equal - not singled out for being autistic, etc. This scheme, thanks to Ms Gillard, will eventually break Australia, and goes to show how weal we have become.

Ben
August 03, 2025

I am 41 years old. I have worked multiple jobs since leaving high school. I’ve always had multiple sources of income to support myself. I paid for 2 degrees with little government funding. I repaid my HELP loan without complaint. I have saved enough super to retire already. I’ve purchased multiple properties without any help from parents. I continue to pay around 25 to 30% of my pre tax income my entire life yet I’ve never received any government money. Nothing during Covid etc. I am forced to live a fairly basic life to prioritise repaying debt and making additional savings. Restaurants are a luxury for me even though between my two jobs I earn above average wage.

I have one child who my family help take care of so my wife can work a few days a week.

How it is that so many people are on NDIS or receive some form of government handout? Have I made the wrong life decisions. Should I just spend all my savings and rely on the government to foot the bill?

Australians used to be proud of not relying on government to give them handouts though now that mindset seems to have changed so that everyone complains whenever they have to work hard for something themselves, i.e housing, university and health care.

Dudley
August 03, 2025

"mindset seems to have changed":

Small and decreasing interest rates.

Government can cheaply fund extra expenses by increasing debt rather than increasing taxes.
Crowd pleaser or voter dis-pleaser?

Home prices increase faster than slow savings.

Interest rates have less effect on fast savers as interest received is a small portion of capital accumulated.
Saving 80% of average after tax income affords the purchase of a home in around 4 years without a mort-gage and starting from $0.

Wildcat
August 03, 2025

When governments throw money at things it always works. NDIS, pink batts, school cola’s. Now spenders want to subsidise batteries. With their track record, especially labor’s, I’m sure it will be a roaring success.

Vee
August 03, 2025

Absolutely. Entrepreneurs and scammers watch on Federal Budget right for where the billions are going to be handed out. Then they set up shop to bring in quick wealth at tax payer expense. Even the Mecican cartels apparently for the NDIS and the Chinese for the Future Made in Australia $100B fund. After years of giving us the cold shoulder the Chinese sent an ambassador to see Albanese within days of the FMA announcement wanting to do business with Australia again.
The batteries are a terrible rort. They are difficult and very expensive to get rid off once their life is exhausted. They don't t last long. Most people are leaving them on-site for future property owners to handle.
We just continue to waste taxpayer money.

AlanB
August 03, 2025

"There has been a notable increase in the number of boys aged 5-7 accessing the NDIS, with 11.5% of this age group currently receiving funding. In the opinion of critics, this rate of disability cannot be legitimate."
I agree and call BS on this one. Are we seriously expected to believe that 11.5% of Australian 5-7 year old boys are disabled by autism? My mother, a teacher, used to say they are just boys, being boys. They are either being over-diagnosed by incompetents, or the NDIS is being rorted.

Darmah
August 01, 2025

On medical advice, one of my elderly neighbours was told to walk more regularly.
So, three times a week a nice gent is paid to accompany her on a walk to the shops which she does with no bother.
The days he doesn’t appear, she drives the hundred meters or so to do a shop.
Why are taxpayers paying for this ?

Ian Radbone
August 01, 2025

Love it!

James#
August 01, 2025

"The National Disability Insurance Scheme (NDIS), ...... providing tailored support to individuals with significant and permanent disabilities."

It's clearly evident that this criteria is not being applied! That's on the government. Time to be held accountable!

For example children having mild autism or learning difficulties do not meet this criterion. As for holidays, cruises or respite breaks etc, I look forward to when pensioners and welfare recipients get the same unaffordable niceties!

Vee
August 01, 2025

I could only ever imagine our Treasurer, Dr of Spin Chalmers, shedding tears for himself.
He would now only do it to make himself appear more human, being the Dr of Political Science that he is.
Those of us that actually pay poditive tax, less than half of tax payers, paid an extra 1% of tax, a doubling of the Medicare Levy, to go towards the NDIS. The govt should be made to keep the scheme within this limit. My partner and I, likewise, have heard horror stories from people working within NDIS of the flagrant waste and fraud.
The government is complicit in this and should be held accountable.

GeorgeB
August 01, 2025

"The government is complicit in this and should be held accountable"

The government was not held accountable at the last election because the majority of the less than 34% of people who voted for them pay little or no tax.

Vee
August 02, 2025

Exactly. You made me laugh!

G Hollands
August 03, 2025

They certainly should, perhaps the electorate could se its way clear to dump these people at the next election, rather than rewarding them for being free with our money?

Soaked Taxpayer
August 01, 2025

Another Labor mess

I've spent time in NDIS land and am astounded by the waste, fraud, and poor scheme design. It is an excellent example of why the government can't be trusted with our money and how poor scheme management allows fraudsters to thrive and opportunists to claim.

I won't be paying any additional tax while these examples continue to exist.

GeorgeB
August 01, 2025

Socialist governments are not especially concerned by waste, fraud and/or poor design of schemes such as the NDIS because it achieves their overarching philosophy of redistributing wealth, at least until they run out of other peoples money.

CC
July 31, 2025

sooner or later the NDIS will run out of other people's money.

Gideon Lubotzky
July 31, 2025

Excellent article. And I think the prognosis for Australia is accurate and worrying

Michael Dillon
July 31, 2025

Framing is everything. The analysis is excellent, but the framing is that it is the NDIS (and perhaps in many readers minds NDIS beneficiaries) which requires reform. Yes it does, but that reform should encompass the total failure of the states and territories to step up, and in fact to 'step down' as evidenced by the authors identification of 'the retreat of mainstream services and the failure of the states and territories to deliver the foundational supports which were part of the original model. Disabled citizens have merely followed the available services. Similarly, the overcharging of provider services , dubbed the 'disability markup' by the author requires much more focussed regulatory attention by government. Unfortunately, the disability lobby voice in Canberra is much weaker than that of the states and territories, and of the business interests representing private sector providers. Markets work, but they require rigorous regulatory enforcement. The real systemic failure lies within our political system and not the NDIS per se.


Chris Thaler
August 03, 2025

Part of the increased cost being paid into the NDIS by the Fed Gov't is also being saved by various State Govt's who reduce their expenditure thus offsetting total Gov't expenditure. Unfortunately we can't rely on these State Govt's to utilise these savings wisely.

Alan
July 31, 2025

We have 5.5M with disabilities in Australia, some of whom are on waiting lists for NDIS. We have 2.6 M addicted to drugs and alcohol, 2.6 M on old age pensions, 800 000 on disability pensions, 920 000 on unemployment benefits. 66% of people are overweight or obese leading to major health problems. Our hospitals and medical systems are stressed out. How much more capacity does the system have to cope with increasing welfare and medical demands. It seems to me that we need a new approach to health and wellness. We certainly need life skills taught in schools.

Adam
July 31, 2025

Why is the NDIS not means tested at least. I have multiple clients on NDIS and have a heap of money, one client with several mill in super....just does not seem right.

FRANCESCO
August 03, 2025

i agree, i know people like that, absolutely saddens me

 

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