Australia is shrinking the NDIS while New Zealand reforms disability support

Australia and New Zealand have taken markedly different approaches to supporting people with disability. But reforms now underway on both sides of the Tasman suggest the two systems may be moving, cautiously, towards some common ground.

Australia created one of the world's most ambitious individualised disability-support programs.

New Zealand did not.

The Australian National Disability Insurance Scheme was built around an important proposition: eligible people with permanent and significant disability should receive individually determined support according to their needs rather than simply taking whatever services happened to be available within a government program.

It was a profound change.

It was also expensive.

Australia is now attempting to contain the extraordinary growth of the NDIS, following a Labor-Coalition agreement that allowed major reform legislation to pass the Senate with 63 amendments.

Across the Tasman, New Zealand has its own disability funding pressures.

But rather than dismantling an NDIS-style scheme — because New Zealand never created one — Wellington has been reforming a considerably more fragmented system of government-funded disability services.

The comparison is revealing.

Australia is attempting to put stronger boundaries around individualised disability funding.

New Zealand, meanwhile, has been attempting to give eligible disabled people greater consistency, flexibility and control within a system that remains much more tightly constrained by available government funding.

The two countries remain far apart.

But they are confronting remarkably similar questions.

Australia's great disability experiment

The NDIS fundamentally changed the relationship between government and Australians with significant disability.

Rather than principally funding organisations to provide predetermined services, the scheme increasingly put purchasing power into the hands of participants.

An eligible participant could receive an individual plan containing funding for reasonable and necessary disability supports.

That created choice.

It created an enormous disability-services market.

And it created expenditure on a scale governments had not originally anticipated.

The Grattan Institute noted earlier this year that the Productivity Commission's original 2011 estimate envisaged a fully developed scheme costing about $13.5 billion and growing at between 3 and 6 per cent annually.

NDIS expenditure has instead passed $50 billion, with recent growth running above 10 per cent.

That trajectory explains much of what Canberra is now doing.

The argument is no longer principally about whether the NDIS is valuable.

It is about whether its existing financial trajectory is sustainable.

The Australian response: redraw the boundary

The Albanese Government's reform program attempts to define more precisely who belongs within the NDIS and what the NDIS should pay for.

The government says the scheme must be preserved for Australians with permanent and significant disability and for future generations who will depend upon it.

One of the clearest examples involves children.

From 1 January 2028, children aged eight and under with developmental delay and/or autism with low-to-moderate support needs will no longer qualify for the NDIS under those circumstances.

Children with permanent and significant disability, including children with substantially reduced functional capacity and high support needs, will remain eligible.

Those with lower support needs are instead intended to receive assistance through Thriving Kids and other foundational services.

This represents more than an eligibility adjustment.

It changes where responsibility sits.

Instead of the NDIS becoming the principal doorway through which families seek developmental assistance, some responsibility moves back towards health systems, schools, community services and programs jointly supported by Commonwealth and state governments.

That creates the question at the heart of the Australian reform:

When someone is moved away from the NDIS, what is waiting for them on the other side?

New Zealand already provides part of the answer

New Zealand provides an interesting comparison because it never concentrated disability support into a universal national insurance scheme equivalent to Australia's NDIS.

Its system is spread across Disability Support Services, health services, income support and other government and community programs.

Eligibility for Disability Support Services generally requires a physical, intellectual or sensory disability, autism, or a combination of these, expected to continue for at least six months and sufficiently affect independent functioning that ongoing support is required.

Generally, the person must also be under 65.

Assessment therefore remains fundamental.

New Zealanders can receive services and, in appropriate cases, individualised funding.

But there is a fundamental difference.

Australia's NDIS developed around individually assessed reasonable and necessary supports.

New Zealand's disability system has historically operated much more explicitly within government funding allocations.

That difference becomes particularly important when costs rise.

New Zealand has discovered the same financial problem

New Zealand has hardly escaped disability-support expenditure pressures merely by avoiding an NDIS.

In 2024, its government provided an additional NZ$1.1 billion over five years to maintain critical disability support services.

The following year, another NZ$1 billion over the forecast period was committed to Disability Support Services to deal with demand and inflationary pressures.

The numbers are dramatically smaller than Australia's NDIS expenditure, reflecting both New Zealand's smaller population and the fundamentally different structures of the two systems.

But the underlying problem is familiar.

Demand rises.

Service costs rise.

Expectations rise.

Government budgets do not rise without limit.

New Zealand has consequently been examining how disability support is assessed, allocated and administered.

New Zealand moves towards consistency

One criticism of conventional disability-support systems is that access can depend heavily upon geography, administrators and available local services.

New Zealand has therefore been moving towards greater consistency in assessment.

Its current Disability Support Services reforms include a more consistent national assessment approach alongside changes intended to increase choice and control over flexible funding.

That is interesting when viewed from Australia.

Australia is trying to impose greater consistency and financial control on a highly individualised system.

New Zealand is trying to introduce greater consistency and individual flexibility into a more constrained one.

The directions are not identical.

But neither are they entirely opposite.

Individualised funding survives in New Zealand

It would be wrong to describe New Zealand's system as simply government deciding which services a disabled person receives.

Individualised Funding exists and allows eligible disabled people and their families or whānau greater choice over how their support is provided.

From April 2026, New Zealand removed restrictive purchasing rules applying to flexible disability funding, increasing the ability of recipients to determine how their allocated funding is used.

That resembles one of the philosophical foundations of the NDIS:

the person receiving support should have meaningful control over that support.

The difference is the mechanism surrounding it.

Australia created an enormous national insurance structure around individual packages.

New Zealand has incorporated individualised funding within a broader disability-support system operating under defined public budgets.

Two different lessons

Australia can learn something from New Zealand.

New Zealand can learn something from Australia.

The Australian experience demonstrates the considerable benefits of giving people with disability greater agency.

It also demonstrates what can happen when government creates an enormous publicly funded marketplace without sufficiently effective boundaries around eligibility, pricing, provider behaviour and expenditure growth.

New Zealand's experience demonstrates the fiscal advantages of operating within clearer funding constraints.

But budget constraints create their own problems.

If demand exceeds available services, the government's accounts may remain controlled while families carry the unmet cost themselves.

That is not necessarily efficiency.

It can simply be invisible expenditure.

The family is the third balance sheet

This is where comparisons of government expenditure can become misleading.

There are effectively three balance sheets involved in disability policy:

the national government.

State, provincial, local, health and education systems.

Families themselves.

If Canberra saves a dollar by removing a service from the NDIS but a state government subsequently spends that dollar providing the same support, Australia has not necessarily saved anything.

Responsibility has moved.

If neither government provides the service and a parent reduces working hours to care for a child instead, the cost has moved again.

It may disappear from government expenditure.

But it has not disappeared from the economy.

New Zealand faces precisely the same problem.

A tightly controlled disability budget can look fiscally sustainable while unmet needs are absorbed by parents, partners, relatives and unpaid carers.

That is why simply comparing the headline cost of the Australian and New Zealand systems tells us relatively little.

Australia may be rebuilding something it replaced

There is an intriguing historical dimension to the Australian reforms.

The NDIS was created partly because Australia's previous disability-support arrangements were fragmented, inconsistent and heavily dependent upon which services happened to exist in a person's state or community.

The danger now is obvious.

As Australia moves people away from the NDIS and towards foundational supports, it must not inadvertently recreate the fragmented system the NDIS was intended to replace.

Thriving Kids is supposed to avoid that outcome.

State services are scheduled to begin rolling out no later than October 2026, with the system expected to be operating at scale by January 2028, ahead of the corresponding NDIS eligibility changes.

That sequencing is crucial.

The alternative service must exist before the existing support disappears.

New Zealand may be moving in the other direction

New Zealand's reforms contain an almost mirror-image lesson.

A system controlled principally through government service allocations can contain expenditure more readily.

But excessive restriction can diminish choice, produce inconsistent assessments and frustrate people who understand their own needs better than administrators do.

New Zealand's moves towards nationally consistent assessments and more flexible individualised funding therefore incorporate some of the principles that made Australia's NDIS revolutionary.

Perhaps neither extreme provides the answer.

Unlimited individualisation creates enormous fiscal risk.

Excessive central control creates rationing, inflexibility and unmet need.

The challenge is finding the point between them.

A Trans-Tasman policy experiment

Australia and New Zealand therefore provide an unusually useful natural comparison.

Australia began with a highly individualised national insurance model and is now strengthening its boundaries.

New Zealand began with a more conventional government-funded disability-services model and is trying to improve consistency, flexibility and individual control.

Both governments use remarkably similar language around sustainability.

And both ultimately face the same economic constraint:

resources are finite while human need is not.

No legislation can eliminate that tension.

Government can only decide how resources are allocated, who qualifies, what assistance is provided and who carries the cost when government support stops.

The Australasian View

Australia's NDIS reforms should not be judged simply by whether they save Canberra $37.8 billion over four years, the amount currently projected from the reform package.

Nor should New Zealand's disability system be judged simply because its headline expenditure is dramatically lower.

The proper comparison is outcomes.

Can a child obtain early intervention?

Can a person with profound disability live with dignity?

Can families navigate the system without becoming professional bureaucrats themselves?

Can governments prevent fraud and provider exploitation?

Can taxpayers sustain the system over decades rather than merely through the next budget cycle?

And when governments decide someone no longer belongs within their principal disability program, what is waiting for that person on the other side?

Australia and New Zealand have approached disability support from different directions.

Curiously, their reforms suggest that each may have discovered weaknesses in its own starting position.

Australia is learning that individualised entitlement requires boundaries.

New Zealand is learning that budgetary control needs to be accompanied by choice, consistency and flexibility.

Somewhere between those two approaches may lie a model that both protects the public purse and recognises the purpose for which disability support exists in the first place:

Allowing people with disability to participate as fully as possible in the societies in which they live.

That is not exclusively an Australian problem or a New Zealand problem.

It is an Australasian one.