Christian Porter has an op-ed this morning passing off welfare policy as industry policy.
The free-trade agreements also provide a new way to link the social services system to the economy as we develop service skills and new technology in the disability sector.
We not only care for Australians with disabilities, but our ongoing commitment will open the opportunity to expand skills and technology for economic growth. In this sense our commitment to the National Disability Insurance Scheme intersects with our innovation agenda.
That is good propaganda but I’m not convinced it is good economics.
The notion that welfare spending intersects with innovation policy is predicated on the notion that any government spending is good spending. It also assumes that any innovation spending is associated with large positive externalities. Both those assumptions are highly contested. Government spending, for example, diverts private consumption and private investment away from private choices and positive net present values to negative net present value activity. The mechanism whereby the government believes that nexus will broken is in a voucher system.
The scheme empowers people with disabilities to make their own decisions about how they are supported. Funding for disability support is allocated to each eligible person, not to a service provider. What this does is change the landscape of the disability sector and market, opening up new opportunities. This includes stimulating a vibrant assistive technology market. It is in this area Australia has the potential to become a world beater.
Indeed – yet the government is assuming that voucher recipients will choose to spent their vouchers on assistive technology and not something else. They also assuming enough expenditure on assistive technology to sustain a global industry. The fact that such an industry has not already emerged in Australia with a medical monopsony providing disability services is telling.
To be clear – increased disability spending will no doubt improve the lives of the individuals who receive that additional income. But it will not improve the overall economy. This is what the government is claiming:
Fortunately, the NDIS is not just smart social policy; it provides the potential for economic advancement. The Productivity Commission concluded that over time the economic benefits of the scheme will outweigh its costs and will add close to 1 per cent to GDP.
Okay – so if we estimate the size of the Australian economy at about $1.6 trillion we’re looking at an industry that will generate about $16 billion per year. That is less than estimates of how much the NDIS is going to cost.
Bottom line: Nice try. There may be good arguments for spending (more) money on disability. There are good arguments for a voucher driven system over a provider driven system (perhaps not as good as education vouchers). Disability driven economic growth is not one of those good arguments.