The Grattan Institute has delivered a scathing critique of the federal government's proposed changes to the National Disability Insurance Scheme (NDIS), warning that funding cuts to social participation budgets could lead to 'absurd' outcomes for Australians with disability.
In a submission to a Senate inquiry, the influential thinktank described Labor's plans to halve social participation budgets as 'blunt and inequitable' and 'underpinned by dubious policy logic'. The submission is the latest criticism of the government's efforts to return the NDIS to its 'original intent' by drastically overhauling who can access supports and how much they can receive.
Government's NDIS Overhaul
The Albanese government's NDIS bill aims to curb the $50-billion-a-year scheme's growth by reducing category budgets from later this year and limiting the number of Australians with disabilities who can access it from 2028. Without these changes, the government estimates costs could reach $117 billion annually within a decade.
The bill will be scrutinised by a Senate committee, which is due to report later this month before a parliamentary vote.
Grattan Institute's Concerns
While acknowledging the need to control costs, the Grattan Institute argued that the case for 'such deep, early cuts has not been sufficiently made and is underpinned by dubious policy logic'. It warned of a 'real risk' that the government would hit growth-reduction targets while missing the point, relying on blunt cost reductions that worsen outcomes for NDIS participants.
Particular criticism was directed at the introduction of ministerial powers to reduce a category of funding by up to 99%. The NDIS minister, Mark Butler, has already proposed a 50% reduction in budgets for social, civic, and community participation. These budgets are designed to reduce isolation and build independence, covering activities such as teaching cooking, using public transport, or attending skill-building groups.
A spokesperson for Butler noted that the 50% reduction would not necessarily affect all participants, as some do not use their full funding allocation. The latest NDIA quarterly report showed participants used about 86% of their social participation funding in the quarter to March 2026.
The Grattan Institute's submission highlighted the 'absurd possibility that someone could qualify for the NDIS because an impairment substantially limits their social interaction... only for the funding for that support to be cut in half, despite it addressing the very need for which access was granted'.
Functional Capacity Assessment
The government's proposal also introduces a standardised tool to determine 'functional capacity', changing NDIS access from January 2028. The Grattan Institute described this as 'a striking inconsistency in policy design', noting that the government assesses disability using a framework that rejects distinctions between physical and social impairment, while funding policies implicitly prioritise physical functioning over social participation.
The government's own impact analysis last month acknowledged that social participation gives Australians with disabilities a sense of belonging, increased confidence, skills, and social networks, reducing isolation. However, the analysis stated that reducing this budget was preferred because it does not impact health and safety.
Data from six months in 2025 showed certain disability groups would be disproportionately affected. For example, about 34% of plans for visually impaired Australians were set aside for social participation, 30% for those with psychosocial disability, and 28% for people with Down syndrome.
The Grattan Institute concluded that the proposed reductions are 'blunt and inequitable' and that savings will not be achieved without shifting costs onto families and informal carers.
The National Aboriginal Community Controlled Health Organisation (NACCHO) also criticised the changes, warning they would widen the gap for disadvantaged Aboriginal and Torres Strait Islander people. NACCHO noted that social participation budgets are primarily used by Indigenous Australians with disabilities to maintain cultural practices and community connections, and recommended adding a sunsetting clause to allow for review.
