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States will be nearly $3 billion worse off if they fail to switch to a new disability support system and keep funding the NDIS in its current form, Treasurer Jim Chalmers has warned state counterparts.
State and territory leaders, particularly in Queensland, have expressed scepticism about funding services for older children and adults with mild to moderate conditions who were not meant to be supported by the NDIS and will be excluded from 2028. Labor is overhauling the NDIS to save $35 billion in the next budget and make the ballooning scheme sustainable.
In 2023, states agreed to a new system of school and community-based programs to cater for people without severe disabilities, including autism. A new Thriving Kids program for children is due to start operating in 2028, the same year the NDIS reforms are scheduled to kick in.
Although states have previously agreed to a $25 billion federal top-up for hospital funding in exchange for fixing the NDIS, some premiers have been reluctant to sign up to changes unveiled this week, with WA’s Roger Cook saying his state should not be on the hook.
Chalmers wrote to state treasurers on Thursday to make the point that, over the first two years of the new NDIS between 2028-30, states would be better off under the new model.
Presently, states can fund no more than 4 per cent of yearly NDIS growth. In future, however, this will rise to 8 per cent, meaning a more expensive NDIS in future will start to hurt cash-strapped states.
In Chalmers’ letters, provided to this masthead, he estimates that NSW would be $890 million worse off over two years, Victoria would stand to lose $720 million and Queensland would be drained of $580 million. Collectively, states could lose $2.8 billion.
“NDIS reform has been a shared priority of our governments for years now. We all have a stake in reforming the NDIS so it can provide the level of care that people need and for our governments to be able to sustainably fund the Scheme,” Chalmers wrote.
“We have a shared interest in achieving sustainability and securing the future of the scheme as well as its social licence with the broader public, and we are committed to working with you on the implementation of these reforms.”
The government this week admitted the NDIS had turned into easy cash for rorters as it unveiled a root-and-branch overhaul of the program set up by the Gillard government. Eligibility rules will be changed so that only people with significant reduction in their quality of life will receive money.
This masthead reported in February that Health Minister Mark Butler was considering slashing the yearly growth of the $50 billion scheme below 5 per cent, which he will, announcing plans to drag spending growth down to an average of 2 per cent over the next four years. Earlier this month, this masthead revealed the NDIS would be the government’s chief savings measure in the May 12 budget.
The changes could yield up to $150 billion in savings over 10 years as the government aims for cuts to slow runaway spending and curb inflation. However, the success of the changes rests on Labor’s ability to strike deals with the states.
NSW Premier Chris Minns has warned that state providers would not be able to provide equivalent-quality care in some cases.
“I understand that it needs to be as best as possible, an affordable program, but we’ve also got to be honest with people … we can’t provide equivalent care in the state system,” he said on Thursday.
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Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.From our partners
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