Key Highlights

  • The government's reviewing actuary says the NDIS savings projections are reasonably likely.
  • The projections are still subject to considerable uncertainty.
  • Finance Minister Katy Gallagher insists the savings must be delivered.
  • The December MYEFO update will be the next major test.

The government says it will find more savings in December's mid-year budget update. Its biggest existing savings measure is now under question. The NDIS changes announced in April are designed to save $38 billion over four years. The government's reviewing actuary, Guy Thorburn, has described the projections behind them as "reasonably likely" but subject to "considerable uncertainty". After Tuesday's rate rise to 4.85%, the budget's credibility matters more than usual.

What the actuary said

According to reports on 3 November, Thorburn's assessment came in a letter to the National Disability Insurance Agency in September, based on preliminary findings.

The letter does not say the savings will be missed. Overall, he considered the projections to be within the "range of reasonably likely outcomes". He also flagged "considerable uncertainty regarding the actual level of future Scheme expenses", and warned that actual costs "may" exceed projected expenses.

He noted the changes "will require a significant level of resources over the short term". He asked for more information about the plans "underpinning the reforms".

Reports said that the changes are designed to reduce growth in scheme spending by 5–6 per cent in the medium term.

Explainer: why an actuary's view matters for the budget

The NDIS is one of the most costly items in the federal budget, and actuarial projections underpin the government's estimates of what it will cost.

The process works roughly like this:

  • The NDIA's actuarial team projects future scheme costs from participant numbers, the supports in their plans and how those costs are expected to change.
  • A reviewing actuary independently tests those projections and the assumptions behind them.
  • Treasury and Finance use the resulting estimates in the budget's forward estimates, including the expected effect of any policy change.

A finding that projections are "reasonably likely" means the reviewer accepts that the numbers are plausible, not that they are certain. The uncertainty he identified is about how far the reforms will actually slow spending once they are implemented.

That matters because $38 billion is booked in the forward estimates as a saving. If the reforms deliver less, the shortfall shows up as higher spending in later budget updates.

Hypothetical illustration: if the reforms delivered 80% of the forecast saving, about $30.4 billion, the gap would be $7.6 billion over four years. That averages about $1.9 billion a year that would need to be found elsewhere or added to spending. If they delivered 90%, the gap would be $3.8 billion, or about $950 million a year. These figures are for illustration only and are not estimates by the actuary, the NDIA or the government.

Gallagher: 'Absolutely we have to deliver those savings'

Finance Minister Katy Gallagher was firm when asked about the actuary's caution on Canberra on Tuesday. "Absolutely we have to deliver those savings," she said.

She linked the savings to public support for the scheme: "Otherwise the social licence of the NDIS will start to disappear." She said the scheme "cannot keep growing at the speed with which it's growing and consume more and more of the budget".

Gallagher said that if the changes did not deliver enough, the NDIA would have to find another way to achieve the savings.

She also blamed the Greens and the Liberals. Of the legislation behind the changes, she said "the Greens never backed it, the Liberals delayed it", and said the delay had "cost several hundred million dollars".

Where it fits in the MYEFO savings hunt

The NDIS figure sits at the centre of a broader effort to tighten the budget. The Expenditure Review Committee of cabinet met on Monday 2 November, and Treasurer Jim Chalmers said further meetings were planned.

In his statement after Tuesday's rate rise, Chalmers said: "We've found almost $180 billion in savings since coming to government." He promised that "there will be more savings in the mid-year budget update in December".

Chalmers also said "budgets aren't the primary driver of prices in the economy, but responsible economic management plays a helpful role". Gallagher would not say whether the government would aim for net savings overall in December, as opposed to savings offset by new spending.

Analysis by the reports published on 1 November found that net policy decisions in this year's budget and last year's MYEFO made a positive contribution over four years, but added about $14 billion to spending across the current and previous financial years. Some Labor MPs have reportedly called for means testing and net savings in the December update.

Against that background, whether the $38 billion NDIS saving holds up is likely to be one of the most closely watched questions in December. Any shortfall would make the government's case on budget repair harder to sustain.

The Opposition's alternative

The Coalition has taken a different approach. It has proposed removing non-citizens from welfare and NDIS support as part of a package of spending cuts that also targets climate and housing programs. These are Opposition proposals and have not been costed in the budget.

The Reserve Bank said on Tuesday it takes the government's spending plans as given when setting interest rates. Governor Michele Bullock said "we take public Demand as a given and we set interest rates accordingly". That means any change to the path of NDIS spending would feed into the RBA's next set of forecasts.

The Board's statement said Inflation is expected to stay elevated "through much of 2027", which keeps attention on any spending growth.

What to watch

  • MYEFO in December: whether the $38 billion NDIS saving is kept, revised or partly replaced by other measures. No exact date has been published.
  • The actuary's final view: Thorburn's September letter was based on preliminary findings, and further information was requested about the reform plans.
  • NDIA implementation: the actuary said the changes will require significant resources in the short term, so watch for evidence that they are on schedule.
  • Quarterly NDIS reporting: participant numbers and payments will show whether spending growth is slowing as planned.
  • Senate scrutiny: further questions on NDIS costs and the effect of the legislative delay are likely in parliamentary committees.