An Estimate of the Economic Effects of the Implementation of the National Disability Insurance Scheme



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An Estimate of the Economic Effects of the Implementation of the National Disability Insurance Scheme

Dr Brendan Long

Senior Research Fellow

Charles Sturt University

May 2015

An Estimate of the Economic Effects of the Implementation of the National Disability Insurance Scheme

Introduction

The primary policy rationale generally presented for the public investment in the National Disability Insurance Scheme (NDIS) has been to provide a fairer, more effective and efficient suite of supports for those with significant disability. It is a conclusion that followed a comprehensive public consultation process, and subsequent high level research work, by the Productivity Commission report Disability Care and Support 2011 (PC 2011). While this report constitutes one of the finest pieces of analytical work and public policy thinking in recent years, it was not without deficiencies. One of the weaknesses of the report is the paucity of the treatment of employment effects generated from the NDIS. The economy-wide effects of the scheme are primarily driven by these employment gains. Unlike other reports the Productivity Commission did not use its economic model to estimate the final GDP gains from the scheme. Failure to clearly measure the employment effects of the NDIS may explain the lack of a specific measurement of the GDP effects of the scheme by the Productivity Commission.


However, both the direct labour market effects, and associated flow on effects for the whole economy, can be estimated. The Australian Bureau of Statistics (ABS) Survey of Ageing, Disability and Carers (SDAC) is a comprehensive survey of intentions and labour market conditions for people with disability. Combined with Census data it provides scope to measure the impact of the NDIS on employment, tax revenue created and expenditure saved on reduced payments. These results can be analysed using an Input Output model to calculate the final multiplier effects for the economy from the full implementation of the NDIS.
Table of Content

An Estimate of the Economic Effects of the Implementation of the National Disability Insurance Scheme 1

Box 1: SDAC 2012 Disability status of main recipient of care living in households 16





Summary of the economic benefits of the NDIS


This paper presents the results of research that has measured the employment intentions of people with disability. It uses data available from the ABS in the latest version of SDAC conducted in 2012 and published in November 2013 in summary form and in detailed form in July 2014. Using the work intentions of people with disability who are estimated to be covered by the Scheme, the research estimates that when fully implemented the NDIS will lead to between 25,000 and 40,000 new jobs for persons with significant disability. There will be many other jobs created in other sectors.
Using an input/output econometric tool called REMPLAN1, this research estimates that these employment gains will increase GDP by between approximately $7-11bn in 2015 dollars when the NDIS is fully implemented.
Implementation of the NDIS will also release carers to enter employment or increase hours of work that have been reduced by carer obligations that support under the NDIS can relieve. Once the carer module is included to capture the benefits of increased labour force participation from carers, an additional 34,000 new jobs for their carers (in full-time-equivalents including the impact of increased hours worked by employed carers). This will result in an additional gain to GDP of $11bn.
In total, the projected GDP gain from the NDIS from additional employment of people with disability and their carers will be between $18bn and $23bn.
The increase in disability and carer employment will also increase taxation revenue for the Australian Government and reduce outlays on income support payments. This gain to taxation revenue from additional employment of persons with disability who are estimated to be NDIS eligible participants is $230m-$370m pa. Associated flow on effects of disability employment will also augment taxation revenue. These estimates, while available under the REMPLAN model, have been excluded from the final estimates as an option for conservatism in the modelling, but are not insignificant. Reductions in income support payments are estimated to be $412m-$640m pa.
The gain to taxation revenue from additional carer labour force participation is estimated to be $830m pa with reduced income support of $73m pa.
When combined the total impact on the Budget of the Australian Government associated with the offsets of additional direct taxation revenue and reduced income support outlays when the NDIS is fully implemented is $1.5bn to $1.9bn pa in 2015 dollars.
Any analysis of this nature requires the adoption of a number of important assumptions and can only be interpreted as an indicative estimate in the longer term. Important caveats to the modelling are described hereafter. However, the aggregate estimate potential GDP gain of up to $23bn billion is not insignificant in macroeconomic terms. In economic terms alone, the analysis indicates that the NDIS is a very positive policy reform for the Australia community.
Table 1: Results of simulations for 2018/19 in $20152


Simulation number

Simulation description

GDP effect $Jan 2014

GDP effect $2015/16

1

Disability employment growth module 1

$10,515.9

$10,726.71

2

Disability employment growth module 2

$7,309.01

$7,455.51

3

Carers entering the labour force

$2,485.75

$2,535.58

4

Simulation 3 including increased hours of work from carers currently employed

$10,511.88

$10,722.57

5

Simulations 1 and 4 combined

$22,174.68

$22,619.14

6

Simulations 2 and 4 combined

$17,818.47

$18,175.62


Table 2: NDIS offsets through additional taxation and reduced income support payments3


Tax and benefit savings Module 1 with carer effect $M

$1,913

Tax and benefit savings Module 2 with carer effect $M

$1,544

The employment gains that drive these GDP gains will start to occur in the NDIS roll out sites, As the NDIS moves towards full implementation these aggregate economic gains will start to be realised (as shown in Chart 1 below).


Chat 1: Estimated GDP gains as NDIS is phased in



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