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 disabilities.
In a submission to a Senate inquiry, the influential thinktank described Labor's plans to slash social participation budgets in half as 'blunt and inequitable' and 'underpinned by dubious policy logic'. The submission is the latest in a series of criticisms aimed at the government's proposal to return the NDIS to its 'original intent' by dramatically overhauling who can access supports and how much they can receive.
NDIS Overhaul Details
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 the scheme will cost $117 billion annually within a decade.
The bill is currently under review by a Senate committee, which is due to report later this month before a parliamentary vote.
Grattan Institute's Concerns
The Grattan Institute acknowledged the importance of controlling the scheme's costs but argued that the 'case for such deep, early cuts has not been sufficiently made and is underpinned by dubious policy logic'. It warned that there is a 'real risk of government hitting the growth-reduction target while missing the point: relying on blunt cost reductions that worsen outcomes for people on the NDIS while underlying design issues take more time to resolve'.
One key focus of the criticism is the introduction of ministerial powers to reduce a category of funding by up to 99%. 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 for participants, covering activities such as learning to cook, using public transport, or attending skill-building group sessions.
A spokesperson for Butler said the 50% reduction would not necessarily result in a cut for all participants, as some do not use their full funding allocation. The latest National Disability Insurance Agency quarterly report showed participants used about 86% of their social participation funding in the quarter to March 2026.
The institute's submission argued that supporting social participation is integral to the NDIS and that the proposed cuts could lead to 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 – perhaps only – need for which access was granted in the first place'.
Functional Capacity Assessment
The government's proposal also includes a standardised tool to determine 'functional capacity', which will change who can access the NDIS from January 2028. The Grattan Institute described this as 'a striking inconsistency in policy design', noting that the government proposes to assess disability using a framework that rejects distinctions between 'physical' and 'social' forms of impairment, while simultaneously introducing funding policies that implicitly prioritise physical functioning over social and community participation. 'In effect, the scheme would measure disability one way, but fund it another,' the submission said.
Impact on Specific Groups
According to the government's own impact analysis, social participation benefits Australians with disabilities by providing a sense of belonging, increasing confidence, building skills and social networks, and reducing isolation. However, the analysis noted that the decision to reduce this budget was preferred because it does not impact the health and safety of participants.
Using NDIS data from six months in 2025, the analysis found that certain disability groups would be disproportionately affected. For example, an average of about 34% of plans for visually impaired Australians were set aside for social participation, compared with 30% for those with psychosocial disability and about 28% for Australians with Down syndrome.
The Grattan Institute concluded that 'the proposed reductions are blunt and inequitable' and that 'these savings won't be achieved without shifting costs on to families and informal carers'.
Indigenous Concerns
The National Aboriginal Community Controlled Health Organisation (NACCHO), the peak body for Aboriginal health groups, warned that the changes would widen the gap for disadvantaged Aboriginal and Torres Strait Islander people. In its submission, NACCHO said social participation budgets are primarily used by Indigenous Australians with disabilities to maintain cultural practices and connection to communities. The organisation recommended adding a sunsetting clause to ensure any reductions are not permanent and can be reviewed.
