When it comes to the Commonwealth budget, there is a light at the end of the tunnel. This light, however, is coming from the accelerating and out-of-control National Disability Insurance Scheme (NDIS) express train charging towards Australian taxpayers. A train, which if not slowed and redirected, will soon result in an economic catastrophe. On current pace, the cost of the NDIS will eclipse total revenue collected by the Commonwealth within 25 years.

Established for a righteous purpose, to provide support and a better life for Australians with significant and permanent disabilities, the NDIS risks losing public support because of its rapidly rising costs and demonstrably declining integrity. Despite the intent of the NDIS, the ultimate test of public policy is its outcome. And to appreciate the ticking social and economic time bomb that it has become, key NDIS statistics and metrics need to be highlighted.

In the 2023 financial year, the NDIS cost taxpayers $36.7 billion. In the 2024 financial year, it is projected to cost $44.3 billion, a staggering 21 per cent increase. This 2025 financial year, assuming the effectiveness of cost control measures promised by the government, the NDIS is budgeted to cost $48.8 billion, 10 per cent more. Over the past five years, the cost of the NDIS spending has increased by 340 per cent at a compound annual growth rate of 28 per cent.

The NDIS is now the government’s third-largest program after distributions to the states and territories, and support for seniors.

Over the three years of the Albanese government, the cost of the NDIS will have increased by $12.1 billion, or 33 per cent.  This (three-year) rate of increase is faster than the growth in tax receipts (8 per cent), GDP (7 per cent), and inflation (14 per cent).

At the end of March 2024, there were 650,000 active NDIS participants. The average cost per participant is $68,000. The median Australian wage is $65,000.

Approximately 2.4 per cent of Australians are NDIS participants. This average is broadly consistent across the states and territories except, inexplicably, in Western Australia where 1.9 percent of the population are NDIS participants and in South Australia where the proportion is 3 per cent.

Autism, intellectual disability and developmental delay are the three most common NDIS participant conditions, respectively representing 36 per cent, 14 per cent, and 12 per cent of the total. Strikingly, individuals under the age of 18 represent 51 per cent of NDIS participants but only account for 24 per cent of the Australian population. This NDIS participation disparity in sub-18-year-olds implies an emerging disability crisis given the young are experiencing disability at twice the national rate. If there were such a generational disparity in any other domain, there would be serious questions asked and numerous inquiries held. It would also be a national budget red flag because of the flow-on effects on productivity and onto other government services including education, health, and social security.

Since the launch of the NDIS, the proportion of Australians diagnosed as disabled has increased. The cost of supporting this increasing proportion of disabled Australians has also increased at a rate faster than economic growth and inflation.

These two phenomena, individually let alone combined, suggest that the NDIS is incentivising over-diagnosis, over-servicing, and fraud – just as famous American investor Charlie Munger might have predicted when he said, ‘Show me the incentive, I’ll show you the outcome.’

A whole new economic sector has developed creating NDIS-compliant legal structures and delivering business development courses teaching people to identify and provide services to the disabled. According to recent research from investment bank Jarden, approximately 130,000 out of 437,000 new jobs created in the 12 months to February 2024 were in NDIS-related industries such as allied health and non-childcare social assistance. A growth that masks the slowdown in the private sector jobs market.

Recently, John Dardo, the head of the NDIS integrity and fraud unit, told a Senate Estimates Committee that, ‘90 per cent of support coordinators commit fraud’ and that prosecuting them would overwhelm the criminal justice system.

In 2022, Michael Phelan, the previous CEO of the Australian Criminal Intelligence Commission, the Commonwealth body chartered with combating threats from ‘transnational serious and organised crime’, estimated that, ‘as much as 15 to 20 per cent’ of the NDIS was ‘misused’.

Assuming the lower bound of Phelan’s estimate, this implies that just shy of $20 billion will have been lost to taxpayers from NDIS ‘misuse’ over the first term of the Albanese government. This amount is broadly equivalent to the annual value of the Phase 3 tax cuts and double what the government allocated for the Housing Australia Future Fund to ‘create a secure, ongoing pipeline of funding for social and affordable rental housing’.

The NDIS is not just a weapon of budget destruction but also contributes to Australia’s inflation, productivity and crime problems. The economic incentives the NDIS creates are leading to an increasing reallocation of national resources from higher productivity to lower productive activities.

The absence of immediate and tangible actions by the government to bring the NDIS under control is puzzling. There is no means testing for eligibility and non-citizen holders of Permanent and Protected Special Category visas are eligible.

Given some of the unusual policy positions emanating from Treasury, including the circular argument that bracket creep is good for inflation management, it is not beyond the realm of possibility that Treasury has advised the government that slowing down the growth in the NDIS would slow down the economy.

Were such advice provided, it would reflect a similar logic deployed when Treasury advised the Morrison government against a clawback mechanism in the JobKeeper scheme so to ‘support confidence, maximise take up and reduce uncertainty’.

The design and operation of programs such as NDIS and JobKeeper, with their high levels of cost, fraud and waste, demonstrate an increasing pattern of contempt shown by Canberra for Australian taxpayers. At least, however, the JobKeeper program has now concluded.

Urgent action by government is required to regain control over the NDIS before the scheme and the Commonwealth budget career into an economic abyss. Equally urgent is a cultural change in Canberra to better respect the increasingly large volumes of taxes it collects, and the damaging economic distortions created.