By bobb |
Prime Minister Anthony Albanese, Victorian Premier Jacinta Allan and SA Premier Peter Malinauskas after the national cabinet agreed on a way to rein in the NDIS.

Phillip Coorey

The federal government will give the states $25 billion in GST top-up payments and extra health and hospital funding by the end of the decade, in return for their agreement to reform the NDIS and save it from collapse.

Anthony Albanese said the NDIS would not survive if not for the national cabinet deal, plus other changes that will weed out price gougers, slash the bureaucracy and restore the scheme to its original purpose of supporting people with permanent and significant disabilities.

Prime Minister Anthony Albanese, Victorian Premier Jacinta Allan and SA Premier Peter Malinauskas after the national cabinet agreed on a way to rein in the NDIS. 

Children with mild autism and early developmental difficulties, who have swamped the NDIS, will instead be supported through schools, childcare centres and other government service settings under a new Commonwealth-state funded scheme that will be phased in over time.

The prime minister described it as “the sort of support that has occurred for a long period of time before the NDIS came around”.

“The NDIS at the moment, with its projections of where it was headed, was simply not sustainable,” he said.

Those already on the NDIS will not be dumped but may be transitioned to the new scheme once it is up and running.

Though they will have to stump up more for disability funding, premiers and chief ministers left the meeting all contending they will be well ahead in net terms due to the extra health and GST funding.

To secure the support of the states, the Commonwealth will extend by three years until 2030 the GST top-up payments. The payments were due to expire in 2027 and the three-year extension will cost an estimated $3.5 billion a year, or $10.5 billion in total.

The Commonwealth also agreed that from July 1, 2025, it would increase its average share of public hospital funding per state from 40 per cent to 45 per cent by 2035, with a guarantee of reaching 42.5 per cent by 2030.

The annual cap on the Commonwealth’s contribution will be abolished and replaced by a cumulative cap for the first five years, enabling a first-year “catch-up growth premium”.

The office of Treasurer Jim Chalmers said this would cost about $13.2 billion between 2025 and 2030.

Also, the Commonwealth will contribute an extra $1.2 billion towards “Strengthening Medicare”, which will add to the 58 Medicare Urgent Care clinics already budgeted to be operating by the end of this year.

These three commitments will cost a combined $24.9 billion, but the government believes the investment will be worth it if the cost of the NDIS, currently $42 billion a year and rising rapidly, can be brought down.

Figure remains negotiable

Under the reforms, national cabinet agreed that foundational supports, such as those for children with mild autism and early developmental challenges, which are rendering the NDIS unsustainable, will no longer be part of the scheme but be supported by a Commonwealth-state 50:50 scheme.

The state and federal contribution to the new scheme will be capped at around $10 billion over the first five years, but this figure remains negotiable until a full list of services is provided.

During the national cabinet meeting, the states said they needed to know the list of conditions that would need to be funded under the 50:50 scheme before they agreed to a cost.

Also under the national cabinet deal, the cap on growth in the states’ share of NDIS funding will rise from 4 per cent to 8 per cent by 2026, after which the Commonwealth aims to cap the growth of the scheme at 8 per cent.

The Commonwealth will fund all cost blowouts from July 1, 2026.

The national cabinet was acting on a review of the NDIS conducted by Professor Bruce Bonyhady and Lisa Paul.

That review, which will be released on Thursday by NDIS Minister Bill Shorten, contains wide-ranging recommendations to get the NDIS on track, especially around price gouging by service providers and weeding out the profiteers.

“You will see that in a range of areas, that it is very possible, and it is indeed necessary, for costs to be reduced,” Mr Albanese said.

“Not in terms of the support that people need, but in terms of bureaucracy and some of the businesses that are being established and some of the structures which are there.”

Dr Chalmers said it was important to not lose sight of the bigger picture, which was putting the NDIS on a sustainable footing. It is one of the top five growing cost pressures on the budget and, without change, is forecast to cost $100 billion a year by 2032.

He called the outcome of the national cabinet meeting “quite remarkable progress”.

Budget certainty

South Australian Premier Peter Malinauskas said the Commonwealth’s share of hospital funding in his state was “nowhere near 45 per cent” and the deal meant “a lot of money coming our jurisdiction’s way”.

Queensland Premier Annastacia Palaszczuk said her state, too, would be ahead in net terms.

Victorian Premier Jacinta Allan effectively conceded that the Commonwealth was giving the states extra money in the form of the GST top-up, so they could give it back as extra disability funding.

“[The] extension of the GST arrangements for another three years gives us that budget certainty from which we can continue to partner, whether it’s with the Commonwealth on NDIS or health and hospital delivery, or on the suite of other services that we are responsible for delivering,” she said.

The GST top-up guarantee was designed by Scott Morrison and the Productivity Commission to compensate all states and territories except Western Australia for the GST revenue they lost as part of a deal to put a floor under the tax allocation for WA, which was constantly complaining it was being dudded.

Under the change, no state can receive less than 70¢ in the dollar from GST raised in their states. It was designed to improve WA’s share, which sat about 30¢ because of the massive royalties it received from its minerals.

Because of larger than forecast iron ore prices since the deal was crunched and, to a lesser extent, higher than forecast volumes keeping WA at no worse than 70¢, the deal has cost the other states far more revenue than expected. The top-up payments are now forecast to be $33.9 billion between 2019-20 and 2026-27, well above the original estimate of $6.7 billion.