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The Economic Forest, Not The Short-Term Accountant’s Trees

27 Jul 2012

Can we suggest a slight re-framing of the debate around the National Disability Insurance Scheme, a re-framing that will, we think, force Barry O’Farrell, Ted Baillieu and Campbell Newman — the state premiers who are opposing putting up a tiny amount of money — to come up with a new rationale.

In a business, the kind of thing the aforementioned state premiers usually embrace as the foundation of all that is good, there are two sides of a ledger: expenses and income. You have to take into account BOTH SIDES.

In the debate over NDIS, all we hear from the opponents — all members of the Coalition — is how much the program will cost. Putting aside the moral argument that there is an obligation to provide support for all of our citizens, may we point out a fact: investing in NDIS will make money. Full stop.

Let’s repeat that: money going into the program will INCREASE the wealth of the country.

This isn’t a political argument. It’s an economic fact.

And it comes not from some left-wing think tank but from the Australian Government’s Productivity Commission July 2011 report:

The most important of the economic benefits are the welfare impacts for people with a disability and their carers. While not counted in official statistics about the performance of the economy, these are genuine and large economic gains. One, partial way of assessing these gains is the value of the implicit income transferred by the NDIS to people with disabilities. Commission estimates suggest benefits of around $7.8 billion annually (and this already takes account of the lost consumption for those people funding the scheme). This is likely to significantly understate the benefits.

It is harder to measure some of the other economic benefits of the NDIS, but it is possible to assess some of its economic effects. These will take some time to emerge. Were Australia to achieve employment ratios for people with disabilities equivalent to the average OECD benchmark — a highly achievable target given the proposed reforms — employment of people with mild to profound disabilities would rise by 100 000 by 2050.

In fact, the package of measures, including through reforms to the Disability Support Pension (DSP), would be likely to raise employment by considerably more than 100 000. Under a reasonable scenario, the Commission estimates that there could be additional employment growth of 220,000 by 2050 (including for people with less severe disabilities).

By 2050, the collective impact of these two employment gains would be around a one per cent increase in GDP above its counterfactual level, translating to around $32 billion in additional GDP (in constant price terms) in that year alone.

Bottom line: from an economic health point of view, it would be foolish not to invest in the NDIS.

People are definitely entitled to their opinions. But, they aren’t entitled to their own facts.