The NDIS is the Ticking Economic Timebomb we Should be Discussing

Australia is barreling towards the 2025 federal election, and the big-ticket topics are sucking up all the oxygen in the conversation. Medicare, cost of living, national security and a housing shortage. But there's an economic elephant in the room that no one in Canberra wants to name for fear of uttering a four-letter word.

NDIS.

It's ballooning into one of the biggest threats to Australia's economic stability. If we don't tackle it head-on, we risk a major productivity crisis and a potentially nasty recession.

The NDIS is on track to cost $125 billion annually within a decade, and the growth is outpacing just about every other major government expense. It accounts for 30% of all new job growth in Australia. 

The care sector, which includes disability services, aged care, childcare, health, and medical services, has doubled in size in under a decade. It now makes up 15% of the entire workforce and is the main engine of government job growth, accounting for 9 out of 10 new jobs in Australia in late 2024.

All this private sector job growth is causing an optics problem. It makes the economy look strong, with an unemployment rate of 4.3%.

But this hides a massive underlying problem. The productive private sector is stagnating.

The Productivity Killer We're Ignoring

What's happening here is a massive distortion of the economy. The NDIS was meant to help those in real need, but it's become a bloated, inefficient bureaucracy. Every year, it takes more workers out of economically productive roles to feed the growing machine. It also takes employed and capable people and pays them to stay at home.

Instead of people entering industries that add to our national wealth, they're funnelled into a system that's sucking up talent with government-backed wages.

This conversion of commercial jobs to artificially created government-funded jobs has a serious implication.  It leads to higher taxation and a less efficient government. Every extra dollar getting funnelled into NDIS is a dollar that has to be taken from the pocket of the productive side of the economy.

That means less money for tax-contributing Australians and less money available to be reinvested in future growth.

And let's not ignore the perverse incentives at play.

Service providers want more clients. They know the medical professionals who are sympathetic to diagnosing them with eligible conditions, and they can coach people on how to apply and qualify.

Autism rates within the scheme have skyrocketed, raising legitimate concerns about how many people are faking or exaggerating certain conditions.

Then, there are the cases of outright fraud. It's enough of a problem to get a serious government reaction.

In one case, a New South Wales syndicate was caught defrauding the system to the tune of $5.8 million, funnelling taxpayer money into everything but disability care. And that's just one example. With weak oversight and billions at stake, it's no wonder that criminals have found a new cash cow in the NDIS.

Labor introduced the Disability Reform Roadmap for 2024-2025, aiming to tighten eligibility, reduce fraud, and ensure that funds reach those who truly need them. Bill Shorten has moved to get the NDIS' back on track,' focusing on cutting down rorts and implementing better oversight.

While this reform might cut back the prior and absurd 23% growth in NDIS spending, it still doesn't solve the problem. The new growth target is 8%.

With long-term GDP growth solidly in the 2-3% range, we will all end up either on NDIS or working for NDIS before this century is out.

These are just cosmetic fixes that don't address the systemic economic threat. It's just enough action to keep voters distracted for another three years, by which time the task will be even bigger. Tinkering around the edges can't solve this problem. 

What's the Coalition doing? Pledging even more money. That's right—Peter Dutton, the guy who's supposed to be the conservative budget hawk, has promised to keep the NDIS cash flowing.

No one wants to touch this issue because no one wants to play the villain, bullying kids in wheelchairs. But this isn't about cutting support for those who need it—it's about stopping a fiscal avalanche before it wipes us all out.

The Fix That We Need

Back when Telstra was Telecom and government-owned, it was the most bloated, unproductive and frustrating organisation to deal with. A commercial focus has improved the efficiency and outcomes for end users.

Introducing the Medicare levy in Australia has reduced the burden on an inefficient public health system.

Like most government bloat, there's only one solution to this problem. Give the NDIS a commercial focus.

There are plenty of examples of the increased efficiency of transitioning to commercial models.

The simplest solution is mandatory disability insurance for all Australians, tracking the model of Medicare.

Put the task of stamping out fraud and ensuring efficient and robust processes in the hands of insurance companies. That's what they are best at.

Every solution is imperfect, and while a privatised model will still require oversight and strong advocacy, continuing to pump up this disfigured party animal balloon can only end in one outcome. Australia goes pop.