The Albanese government is preparing NDIS funding cuts in the upcoming May 12 budget, as Treasury research links the rapid expansion of the "care economy" to Australia’s persistent productivity malaise.
With federal spending reaching 27% of GDP—the highest level since 1986, excluding the pandemic—Treasurer Jim Chalmers and Finance Minister Katy Gallagher are under pressure to find approximately $130 billion in savings over four years.
Internal sources indicate that Health Minister Mark Butler and NDIS Minister Jenny McAllister must curb the scheme's annual cost growth to between 5% and 6%, a sharp reduction from last year’s 10.3% rise.
A primary focus for savings is the $11.6 billion spent on social and community supports, alongside the $10 billion annually allocated to participants with autism.
David Cullen, the NDIS' former chief economist, noted that these funds often lack sufficient oversight, making them a primary target for the expenditure review committee.
Treasury’s submission to a Senate inquiry revealed that the doubling of the care workforce—now 16% of all Australian workers—has dragged down national productivity, which declined by 1% annually in the non-market sector over the last five years.
While the sector has supported record-low unemployment of 4.3%, economists like HSBC's Paul Bloxham warn that ballooning social spending is "crowding out" private sector activity.
Former NSW Treasury chief economist Stephen Walters described this as a "break glass moment," urging the government to implement structural reforms before inflation and decade-long deficits further erode living standards.