This appeared last week:
The NDIS is a taxpayer sinkhole. Is it an economy killer too?
The uncontrolled growth in the NDIS is contributing to Australia’s inflation and productivity problem, economists and business operators believe.
John Kehoe Economics editor
The stagnating economy and shocking revelations this week about widespread defrauding of the $44 billion National Disability Insurance Scheme have more in common than it seems.
Criminals and shonks were exploiting the NDIS to pay for drugs, luxury holidays and cars, NDIS integrity chief John Dardo revealed.
Nine out of 10 NDIS plan managers surveyed showed signs of fraud, and the justice system would be overwhelmed if all the scams were prosecuted, Dardo said in explosive testimony to the Senate.
Opportunists are setting up businesses purportedly to service people with disabilities, only to line their own pockets. The cost of the NDIS has surged from $13 billion in 2018-19, to $30 billion in 2021-22, to $44 billion in the current financial year, and is projected to hit $61 billion by 2027-28.
The NDIS actuary has warned that unbridled growth could take the scheme to $125 billion a year by the early 2030s, unless the government takes drastic action on eligibility rules. Belatedly, NDIS Minister Bill Shorten introduced proposed changes to parliament this week.
The rapidly growing scheme, which started about a decade ago with broad community support, is not only a concern for taxpayers. The out-of-control NDIS partly explains why the nation has a productivity and inflation problem.
Employers in aged care, childcare and cleaning are losing staff to $70-an-hour, self-employed NDIS jobs, they say.
Warehouse operator Carla Ryan says her business has suffered from a constant stream of workers leaving for higher-paid, unskilled NDIS work. “It leaves us to constantly push up pay rates, well above award, to keep finding and retaining good staff,” she says.
“I see and hear constantly about people who are choosing to work three nights a week, sleeping over at an NDIS-funded caring role where both the carer and cared-for person are mostly asleep, for $2400 gross, or $800 a night.
“This is versus a large range of alternative jobs they are prioritising this over, including tradie jobs, warehouse jobs, waiting jobs, accountant jobs, jobs of all types.”
Ryan also questions the impact of the NDIS on productivity and wage inflation. “Then on total inflation? Then on RBA rate rises?” she asks.
The national accounts published this week reveal that labour productivity, measured as GDP per hour worked, has flatlined over the past 12 months and is sitting 5 per cent below its pre-pandemic peak.
Productivity is the key determinant of living standards. The higher it goes, the higher real wages can sustainably rise as workers become more efficient at producing goods and services in a low-inflation way.
Reserve Bank of Australia governor Michele Bullock reiterated on Wednesday the importance of a productivity recovery to ensure wage rises were sustainable and don’t fuel inflation in a full-employment economy.
But there is a twist in the productivity numbers that comes back to the NDIS problem.
Productivity in the private sector is growing reasonably healthily and is back above its pre-pandemic level. But productivity in industries where governments set or highly regulate prices – healthcare and social services, public administration and safety, and education and training – has been going backwards.
This is the so-called “care economy” that Treasurer Jim Chalmers has talked up as key to Australia’s productivity aspirations. The care economy, particularly the NDIS, is becoming a bigger share of the overall economy as more people join the NDIS and an ageing population puts more demands on aged care and healthcare.
But the social assistance sector is also becoming less productive relative to the private sector.
Australia is now suffering a version of what economists know as Baumol’s cost disease.
Named after American economist William Baumol, his theory from the 1960s explains why prices for the services offered by people-dependent professions with low productivity growth – such as the NDIS and aged care – keep going up.
Almost one in three jobs created last year were in NDIS-related sub-industries like allied health and non-childcare social assistance, according to investment bank Jarden.
At a time of high inflation, policy economists now believe the uncontrolled growth of the NDIS is contributing to Australia’s inflation and productivity problem.
Former Treasury economist and former National Disability Insurance Agency executive Hassan Noura says labour shortages across the economy are contributing to supply side capacity constraints and putting upward pressure on inflation.
“Given this context, an important economic policy priority is to facilitate the smooth reallocation of labour from low to higher productivity jobs and sectors,” says Noura, now director of People Economics.
“When it comes to the NDIS, we need to talk about the quality of jobs and the quality of supports delivered, not simply the number of jobs and supports. Many of the jobs being created by the NDIS are not frontline care jobs directly benefiting people living with disability.”
Noura adds that a lot of the jobs that have been created are low-paying administrative and intermediary jobs, such as support co-ordinators and plan managers that help participants to submit their NDIS invoices and navigate the excessively complex NDIS ecosystem.
“Other jobs are being created to help combat and police the growing fraud in the sector,” he says. “The far better solution for participants and for the productivity of the economy would be to simplify and re-design the NDIS so that these jobs would not be needed in the first place.”
He says that while frontline care jobs “are more productive and more directly benefit participants”, caution and nuance are needed when creating jobs.
“For example, it’s great for people living with disability, and the productivity of the economy, if we create 1000 more allied health jobs that deliver hundreds of thousands of additional therapy sessions that are truly needed and effective and that lead to better outcomes.
“It’s less great, if not wasteful, and bad for the productivity of the economy, if we are creating these jobs to over-service NDIS participants with additional and/or ineffective treatments that do nothing to improve outcomes.”
Since June 2020, the number of businesses in social assistance and healthcare has exploded by about 49,000, according to the Australian Bureau of Statistics. The rate of business growth in health and social assistance is nearly three times the pace of population growth. Healthcare and social assistance businesses grew at a faster rate than any other sector in the year to June 30, 2023, expanding by 6.7 per cent.
While much of this is a natural evolution of the ageing population and a symptom of a wealthy nation demanding more personal care services, Australia is indisputably expanding jobs and businesses in low-productivity sectors that are funded by taxpayers. The NDIS has more than 170,000 unregistered providers receiving payments from an NDIS plan manager.
Queenslander Jim is critical about the services provided by the taxpayer-funded NDIS.
“A friend of mine who lives with his mother in a massive Queenslander overlooking the Brisbane river, with Rolls-Royces and Range Rovers in the driveway, has received tens of thousands of dollars from the NDIS because his mother is in a wheelchair,” he says.
“Anything remotely associated with the upkeep of the house is paid for by my tax dollars. A new pathway and driveway costing tens of thousands, paid by the NDIS because he rolls his mum down there once a week, despite the fact that he rolled his mum down the old one, with no problems, for 20 years.”
The NDIS has also paid for new airconditioning, a new fridge, and fixed half the property’s roof, he claims.
Meanwhile, Sheryl Brady, a mother of two sons with Down syndrome who receives help from the NDIS, says the government sets the prices providers can charge at too high a rate.
“Therapists were immediately able to charge a much higher rate than before, when the NDIS began,” she says. “And charges for support workers are also too high.”
She is also sceptical that higher pay attracts superior workers. “Inexperienced therapists are going into private practice too soon to get the higher pay,” she says. And support workers “find it’s good pay where they can sit on their phone and not do much, and the client/participant hasn’t always got the knowledge or skills to complain.”
Since the end of the pandemic, the economy has been running at full tilt. Demand in the economy is running ahead of the economy’s capacity to supply goods and services in a low inflation way, a point made by RBA governor Bullock this week.
At the same time, federal government spending has expanded from 24.5 per cent of GDP before the pandemic to about 26 per cent – the equivalent of about $35 billion a year more in spending, in addition to increases by state governments and large nominal wage rises.
The NDIS, which is a program with 650,000 people, now costs more than universal Medicare and rebates for private health insurance for the entire population.
Australia is now among the biggest government spenders on disability in the world, outlaying more than $84 billion a year (more than 3 per cent of GDP), for items such as the NDIS, disability support pensions, and carer payments.
This is more than double the share of GDP in the United Kingdom and Canada, and around the same levels as the European welfare states of Iceland, Finland and Sweden. So much for the claim a decade ago the NDIS would “pay for itself”.
Workforce participation rates of family carers have barely budged and some family members double-dip on the $44 billion NDIS and separate $13 billion carers payment.
When government consumption grows at a time when the economy is at full capacity, then household consumption has to fall to make room. Inflation and a higher income tax burden on households is the equilibrating mechanism.
One disability service employer says: “All the dirty secrets about fraud and dodgy providers have been known in the sector for years. The media stories now coming out are still only scratching the surface.
“We’ve been trying to get the government to listen that our sector does not have a regulatory system, which is pathetic,” they say. “It’s the fastest-growing government scheme and biggest cost blowout, but it has the least regulation, with no checks and balances.
“Someone can get out of jail today, get an ABN and start providing services tomorrow.”
He declines to be identified because he says disability advocates are “sensitive” to anyone publicly criticising the NDIS, and that being named could hurt his business.
The NDIS is fast becoming Australia’s equivalent of the UK’s once-treasured but arguably broken National Health Service.
It has become a monster, and appears to be slowly killing the economy.
Here is the link:
https://www.afr.com/policy/economy/the-ndis-is-a-taxpayer-sinkhole-is-it-an-economy-killer-too-20240606-p5jjp6
This really feels like an uncontrolled financial disaster and I fear the impact on the health sector is going to be enormous!
There is only so much money in the Federal Budget and you can bet that, already, funds are being shifted from Health to try and cope with this emerging humongous blowout.
I do not believe “this will end well” for the health sector - or the economy in general! Finding the will to reign in the cost of the NDIS is, I suspect, just too hard for Government until we are all pretty much ruined!
David.
See also:
D.
1 comment:
That is a sobering read, David. Who needs Ransomware when we have schemes like this? They talk about the low entry-level to tap into the NDIS honey pot; I wonder, do we need better trained public servants and better trained in a broader set of skills to handle this sort of massive programme? The NDIS is not the first or the last; these schemes keep getting bolder in their objectives and failures.
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