False Economy: The economic benefits of the NDIS and the consequences of government cost-cutting

November 3, 2021

Social Innovation

The NDIA’s Annual Financial Sustainability Report of December 2020 (AFSRDec20) made waves in the disability support community when it was released earlier this year. It contains modelling stating that over the coming five years the participant costs of the NDIS will be $50 billion more than previously assumed. By 2029-30, the AFSRDec20 modelling suggests an annual overshoot as high as $22 billion; a 54% increase in costs.

This report discusses, where data is available, some of the issues surrounding the new NDIA modelling (Section 1). It then goes on to assess the broad economic activity generated by the NDIS, including employment and consumption (Section 2), and the potential costs of limiting NDIS spending at sub-optimal levels (Section 3).

We estimate that:

  1. The NDIS employs over 270,000 people over 20 different occupations, and contributes to the employment of tens of thousands more workers indirectly;
  2. The economic impact of the scheme is likely very large, even compared to other types of government spending. A conservative estimate of the multiplier effect of the NDIS would be in the range of 2.25; and
  3. Such a multiplier effect would mean that the economic contribution of the NDIS in 2020-2021 is around $52.4 billion.

Because the NDIS has such a strong impact on employment and in generating economic activity, underfunding the scheme has significant costs. We estimate that for every $1 billion that the NDIS is under-funded, significant negative outcomes occur across the economy including:

  1. A drop in employment of around 10,200 jobs, reducing the employment rate by 0.1%;
  2. A decline in total economic activity of $2.25 billion; and
  3. 0.14% reduction in total GDP, or a 0.22% reduction in the services economy.

The consequences of underinvesting in the NDIS would be disproportionately born by women, carers and people living with a disability.

The ‘affordability’ of a crucial service is inevitably a question to grapple with. If a service is essential, placing a dollar figure against what we as a nation are willing to pay for it can seem perverse. However, with limited budget resources, decisions over allocation must be made.

It is essential that these contested decisions are based on sound, transparent and publicly-available analysis, not made behind closed doors based on secret modelling.