I have found an interesting Hansard transcript from Senate Estimates where Senators from Labor, the Liberals, the Nationals, and the Greens were made aware of the NDIS costs issue by the Australian Government Actuary. Peter Martin from the Australian Government Actuary very clearly told them here that the 2011 estimate of NDIS costs by the Productivity Commission was not in future dollars. And Dr Ralph Lattimore (Assistant Commissioner from the Productivity Commission) also made it clear to the Senators that the 2011 estimates were not in future dollars.
This was a 2012 Budget Estimates hearing for the Economics Legislation Committee held on Thursday 31 May 2012.
Present were Committee Senators George Brandis (Liberal); David Bushby (Liberal); Doug Cameron (Labor); Richard Colbeck (Liberal); Mathias Cormann (Liberal); Mitch Fifield (Liberal); Barnaby Joyce (Nationals); Anne McEwen (Labor); Nick Sherry (Labor); Arthur Sinodinos (Liberal); Larissa Waters (Greens). From the Treasury Portfolio Senators Don Farrell (Labor) and Penny Wong (Labor) were present. The Secretary from the Department of the Treasury, Dr Martin Parkinson, was also present.
At 14.58 the Committee questions the Actuary. Immediately before this Senator Wong absents herself from the session for 1 hour. Penny Wong: “While they are changing over, I am going to be replaced for a short period—about an hour—by Senator Farrell.”
Liberal Senator Mitch Fifield questions Peter Martin from the Australian Government Actuary.
Fifield asks if the Actuary was commissioned to review the costings of the Productivity Commission on behalf of the COAG Select Council on Disability Reform, and Martin says “We were asked by the Treasury to review the reasonableness of the cost estimates undertaken by the PC.” “The work we did was in consultation with states and territories, so there was that COAG overlay to it.”
Martin says the Actuary’s work reviewing the NDIS costs “commenced on the second half of 2011”.
Martin said the Actuary looked at the Productivity Commission’s methodology and assumptions to assess the reasonableness of what they had done, and then “we looked at trying to roll out those costs into future dollars. The Productivity Commission recommended full rollout in 2018-19. Their costings had not contemplated the inflationary effects between now and then.”
Senator Fifield and the Actuary spoke about the assumptions about NDIS participant numbers and how around 300,000 people had disability supports at that time, the Productivity Commission estimated around 411,000 people would be NDIS participants, contrasted to the 700,000 Australians who then had severe or profound level disability. Martin later says the Actuary did not look at what the NDIS would cost if it had 700,000 participants, responding to a question by Senator Fifield.
Senator Fifield raised the issue of inflation and also the Fair Work SCHADS Decision: “ou said that you had to update some of the PC’s work for inflation. Another factor would be the Fair Work Australia decision in relation to sector workers pay.”
Martin makes a very important and relevant point about the cost estimates for the NDIS being the best they can do, but that it is hard estimating for a program which is completely different to how disability supports have traditionally been provided in Australia:
“The point that we have been trying to emphasise is that there is a lot of uncertainty around this number. We are talking about a National Disability Insurance Scheme, which is very different from the way disability services have been provided to date. In other words, if someone is eligible for support by virtue of their disability then they will be supported. So, you can only estimate the costs. It is not like, ‘Here is the budget, spend it and when you have run out that is it.’ More than that, the decisions around spending are in large part going to be subjective, qualitative decisions about what an individual’s needs are. We have been trying to emphasise that the cost estimates are the best available, but they are estimates.”
Senator Fifield asks “Would it be possible for a copy of the report which was provided to Treasury to be tabled for this committee?” and Martin says “We will take it on notice. Yes, it should be fine; it is with the states and territories. We will take it on notice.”
I presume that this is the 2012 Actuary’s report which states the NDIS will cost $22 billion at full scheme, expects full scheme to be arrived at in 2018-19, and says the average cost per participant will be $50,000.
Senator Fifield says it would be useful to have the Actuary’s work in the public domain.
Later in the hearing the NDIS comes up again, when the Productivity Commission is being questioned.
Liberal Senator David Bushby handles the questioning this time.
Dr Ralph Lattimore from the Productivity Commission clearly answers questions of the 2011 NDIS cost estimates, again explaining they were not in future dollars.
” Our proposal is $2.4 billion in 2015-16. I should clarify the nature of our projections. Ours are real expenditures, so they are based on fixed constant price terms. They are not budget forecasts per se. In a budget forecast you would have to include price increases. But our model is one of constant prices.”
Senator Bushby asked “So the number in 2015-16 dollars would probably be a higher actual cost?”
And Dr Lattimore states plainly “It would be higher because inflation would push it up.”
Senator Penny Wong praises the Productivity Commission report and rebuts Liberal criticism of the early spending by Labor on the NDIS (the Liberals complained in 2012 and 2013 that Labor was not spending enough setting up the NDIS) “Let us just be clear. It is a very, very good report. The government has made a decision in a very tight budget to find $1 billion to commence the launch a year early and to do the learning in conjunction with the states from the implementation of those launch sites.”
Senator Bushby says the NDIS has bipartisan support, and Senator Wong says the Liberals don’t really support it and are asking all these Senate Estimates questions on the costs due to that:
“No, there is not. I get irritated on this issue where I would actually like bipartisanship. When the shadow Treasurer makes the comments he has made about not being able to support something because he cannot fund it, you come in here and are clearly running a political line of argument to the Productivity Commission. I would quite like it if we could actually say, ‘Let’s do this properly.’ We, this government, in a budget where we had to find $34 billion worth of savings, found $1 billion and brought a launch forward early because we think this is something very important.”
Senator Bushby complains that the Productivity Commission recommended one way of rolling out the NDIS and Labor have “proposed something different. I am just trying to juxtapose it to understand what that means in terms of your proposal and how it will be rolled out compared to what was recommended.”
Senator Bushby suggests a bipartisan committee for the NDIS, and Senator Wong hates the idea and says “To talk about it more? That is a good idea. Bipartisanship is not a committee. It is actually not playing politics with something. That is bipartisanship.”
The questioning then ends on very cross terms.
Senator Bushby: We will leave it at that.
Senator Wong: Good idea.
Source:
Hansard — Commonwealth of Australia
Australia, H. C. o. (2012). Effects of the GFC on the Australian Banking Sector: 10/08/2012: Senate: Economics References Committee. Hansard — Commonwealth of Australia Retrieved from https://parlinfo.aph.gov.au/parlInfo/download/committees/commsen/6d1c34b3-011e-45da-924e-97a7dec70169/toc_pdf/Economics%20References%20Committee_2012_08_10_1277_Official.pdf;fileType=application%2Fpdf#search=%22committees/commsen/6d1c34b3-011e-45da-924e-97a7dec70169/0006%22
Zoe Emily Mithen 