We Must Choose Between Cutting Mass Welfare or Drowning in Debt, Economist Warns

We Must Choose Between Cutting Mass Welfare or Drowning in Debt, Economist Warns
Pedestrians move along George Street in Sydney CBD, Australia on Oct. 22, 2022. (Lisa Maree Williams/Getty Images)
Daniel Y. Teng

One economist warns that Australian policymakers will need to make tough decisions sooner or later as the latest budget papers reveal the soaring cost of ambitious social welfare programs like the National Disability Insurance Scheme (NDIS), which is predicted to exceed the cost of the defence portfolio.

"They've got this long-term problem with trying to fix the budget, and they really haven't done that because, politically, it's difficult for them. They've got a commitment to all this additional spending like the NDIS, paid parental leave, and the childcare subsidy," said Gene Tunny, director of Adept Economics, in an interview with The Epoch Times.

Spending on welfare programs like aged care and veteran services will soar from $76.3 billion (US$49.6 billion) in the current financial year 2021-22, up to $102.5 billion by 2025-26, according to budget estimates. At the same time,e spending on family and childcare assistance will increase from $37.4 billion to $48.9 billion over the same period.

However, the rapid growth of the NDIS has received the most attention, with budget papers revealing handouts to jump from $29.8 billion to $51.8 billion.

Labor Has Pledge NDIS Review

The Labor government—responsible for the NDIS's inception in 2013—has stood firm by the program pledging a wide-ranging review, additional hiring of 380 staff, and $126.3 million to set up a task force to deal with rorting or fraud in the service.

The task force will also include federal police, the tax office, and the Australian Criminal Intelligence Commission—it is expected to reap $291.5 million over four years.

NDIS Minister Bill Shorten said the review would help restore trust in the NDIS.

"Nine years of Coalition neglect has left the scheme not in the position which I think Australians would like to see it in," he told reporters in Canberra on Oct. 25.

"This review is not about a razor gang and cost-cutting; it's about changing and recasting the scheme from one of the cost of everything to the value of what we're getting."

Unrealistic Expectations of the NDIS

Opposition leader Peter Dutton has accused the Labor government of telling the public they can continue to "have more, not less" of the program.

"Bill Shorten, over the last five months, has been running around telling people that they can have more, not less, under the NDIS," Dutton told the Australian Broadcasting Corporation on Oct. 26.

"We’ll support sensible measures because I want sustainable funding into that programme. It’s necessary, it’s right, and it’s a very important piece of our social architecture, but it does need to be sustainable.

"It’s more expensive now than Medicare, and if the government had a plan, they should have put it in the budget last night," he said.

The program's spending problems stem from the wide ambit of services it tries to cover—with no limitations—from disabled individuals hiring helpers for basic tasks at home, to fitting out investment properties with disability equipment.

In terms of the overall budget, government spending will continue to exceed revenue by around two percent of GDP (around $50 billion per year), and will accumulate to around $1.1 trillion by 2023-24.

"They’re still running a deficit and injecting more money into the circular flow of income than they’ve taken out. That’s adding to inflationary pressures,” Tunny said.

Inflation has hit 7.3 percent, according to a September quarter update from the Australian Bureau of Statistics.

He also pointed out concerns with increasing interest payments on federal government borrowing, which is slated to increase over the next five years from $19.9 billion in 2021-22, to $35.3 billion in 2025-26. This will place further pressure when bonds mature, and the Treasury Department needs to start paying off the interest.

“You’ve got to pay the bondholders first. You can’t bring in the NDIS, paid parental leave, or childcare subsidy if you’ve got an increasing interest bill,” Tunny said.

“So that’s a problem. Long term, we can’t have a situation where we are running deficits and accumulating debt while adding to the interest bill. It’s just not going to work, and they’re going to have to make some hard decisions.”

Daniel Y. Teng is based in Brisbane, Australia. He focuses on national affairs including federal politics, COVID-19 response, and Australia-China relations. Got a tip? Contact him at daniel.teng@epochtimes.com.au.