Julia Gillard is taking a week off and, in the process, doing her bit for Queensland's struggling tourism sector.
Julia Gillard is taking a week off and, in the process, doing her bit for Queensland's struggling tourism sector by spending her time between Port Douglas and Cairns.
The Prime Minister left town with a big win under her belt - securing funding and agreement for trials for the National Disability Insurance Scheme after staring down the NSW and Victorian governments and shaming them for their parsimony.
It is an important victory but just an early one. The real battle remains in funding the NDIS when it is a fully-fledged, national operation and it is a battle Tony Abbott is more likely to face than Labor.
Today's Nielsen poll gives further grist to the theory rife on both sides of politics that the public has switched off and is just waiting for election day.
Assuming this Parliament runs the full term and the next election is held in the spring of 2013, then whoever wins will inherit the series of trials for the scheme due to start on July 1.
The Productivity Commission, which designed the scheme, recommended those trials not start until 2014 but the government, with the election in mind, brought the process forward a year so it could trumpet a worthy reform.
The commission also recommended the Medicare-like scheme, to provide lifelong, taxpayer-funded care for the disabled, be fully operational by 2018.
The states and the Commonwealth spend about $7 billion a year on the disabled. Of that, the states receive $4.7 billion from the Commonwealth. The NDIS will cost about $15 billion a year. The states are happy to hand back the $4.7 billion but want no extra net financial exposure.
This means whoever is in federal government by 2018 would need to find an extra $8 billion, every year, in perpetuity, to fund the scheme.
The commission said the Commonwealth must be the sole funder and administrator of the scheme to ensure it operates efficiently and is devoid of the moronic blame game politics that ravage jointly-funded policy areas such as health and education.
The commission warns against a levy and says the preferred model is to take the money from general revenue. But it accepts the extra money will not just appear.
''The amount needed could be funded through a combination of (spending cuts), fiscal drag and, if necessary, tax increases,'' it says.
Around the dinner table at The Lodge last Tuesday, there was a rare outbreak of agreement among Liberal and Labor premiers when they gave Gillard their blessing for an income tax increase or a levy. Anything that spared them having to put their hands in their pockets. They even offered her political protection by promising political backing.
Gillard is no idiot. Imagine flagging yet another new tax, no matter how worthy the cause. She declined and has subsequently suggested Labor would prefer the states contribute to the scheme.
Such a decision need not be made for several years and, given Labor's poll standings, it is more a hypothetical question for the government.
But Abbott is the odds-on favourite to win the next election and needs to give it more serious consideration. He has pledged full support for the NDIS and says he will adhere to the commission's plan. This means he will fund it from general revenue and does not rule out a tax increase or massive spending cuts to find the money.
On Friday, when asked, he pointedly and wisely declined to address this specific question.
When the commission released its report last year, the Coalition's disabilities spokesman, Mitch Fifield, was asked about the prospect of a tax increase and said the Coalition had an open mind to the report and its recommendations.
The opposition finance spokesman, Andrew Robb, committed the Coalition yesterday to a fully-funded scheme by 2018, proposing spending cuts as the likely way to find the money.
All of this adds pressure on Joe Hockey, the shadow treasurer and the poor cove who needs to find the $8 billion a year.
If elected, Hockey is already bound to deliver tax cuts and pension increases while abolishing the carbon tax as a revenue source. Similarly, he is bound to deliver billions in superannuation increases minus the mining tax revenue source.
After the budget, he tried to row back on the NDIS, saying that it was cruel to offer hope to the disabled when there was no known way to fund the scheme.
He backed up last week, saying if he were treasurer, he ''wouldn't go down the path of raising expectations on a program as important as this without actually finding the money''.
Others, it seems, are going down that path for him.
Phillip Coorey is the chief political correspondent.
Frequently Asked Questions about this Article…
What is the NDIS and when do the trial sites start?
The NDIS (National Disability Insurance Scheme) is a proposed Medicare‑like program to provide lifelong, taxpayer‑funded care for people with disabilities. The government moved up the start of trial sites to begin on July 1 (earlier than the Productivity Commission's original 2014 recommendation), with the commission recommending full national rollout by 2018.
How much will the NDIS cost and what is the funding gap?
The article notes Australia currently spends about $7 billion a year on disability support, with states receiving $4.7 billion from the Commonwealth. The NDIS is estimated to cost about $15 billion a year, meaning an additional roughly $8 billion a year would be needed if the states hand back the $4.7 billion and require no extra net exposure.
Who should fund and administer the NDIS according to the Productivity Commission?
The Productivity Commission recommended that the Commonwealth be the sole funder and administrator of the NDIS to ensure efficiency and avoid the political 'blame game' that can affect jointly funded policies such as health and education. The commission warned against funding the scheme via a dedicated levy and preferred funding from general revenue.
What funding options are being discussed to cover the cost of the NDIS?
The commission said the extra money could come from a combination of spending cuts, fiscal drag and, if necessary, tax increases. State premiers even offered political backing for an income tax rise or levy, though Prime Minister Julia Gillard declined that route. Political figures on both sides have suggested spending cuts or changes to revenue as possible options.
What are the major political positions on NDIS funding that everyday investors should know?
Key positions in the article: Prime Minister Julia Gillard secured trial funding but declined to propose a new tax or levy, preferring state contributions; Opposition leader Tony Abbott has pledged support for the NDIS and said he would follow the commission's plan, funding it from general revenue and not ruling out tax increases or spending cuts; Coalition spokespeople (including Mitch Fifield and Andrew Robb) signalled openness to the commission's recommendations, with Robb explicitly proposing spending cuts as a likely funding source. Shadow treasurer Joe Hockey faces particular pressure to find the additional $8 billion a year.
Could NDIS funding choices lead to higher taxes or spending cuts?
Yes. The article makes clear that the Productivity Commission and senior politicians have discussed a mix of spending cuts, fiscal drag and possible tax increases as ways to fund the scheme. While a dedicated levy was discouraged by the commission and rejected politically by Prime Minister Gillard, other leaders have not ruled out tax rises or major spending adjustments.
How might decisions about NDIS funding affect everyday investors?
While the article focuses on politics and policy rather than markets, it indicates funding the NDIS could require noticeable changes to government revenue or spending. For everyday investors, that can translate into potential policy-driven impacts such as tax changes that affect household disposable income, or spending cuts that change government demand in certain sectors. Investors should watch fiscal decisions and political debate around the $8 billion a year funding gap.
What are the remaining hurdles and timing risks for the NDIS rollout?
Remaining hurdles include finding sustainable funding for a fully national scheme and negotiating state contributions while avoiding increased state net exposure. The trials are due to start on July 1 and the commission recommended full operation by 2018, but the ultimate approach depends on which party holds government after the next election and how politicians choose to fund the ongoing $15 billion‑a‑year program.
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