Taxpayers forced to outlay over $20 million after embattled NDIS operator fails to pay wages of 1200 workers
NDIS firm SDA Cocoon, headed up by ex-bankrupt investment spruiker Zaffar Khan was placed into the hands of liquidators David Mansfield and Philip Robinson from Deloitte in May after the NDIS Quality and Safeguards Commission slapped its parent company Horizon Solsolutions Australia with a 30-day ban.
Horizon was accused of wrongly charging more than $77,000 for services to three dead people and conceded it needed to provide tens of thousands of dollars in repayments that should not have been made.
Cocoon also allegedly owes 1200 former employees up to $30,000 each in unpaid wages.
The company has been accused of neglecting to provide its workers with wages for up to four months before the firm shut its doors.
A collective of former Cocoon employees have now lodged an application to the Fair Entitlements Guarantee which provides workers with up to 13 weeks compensation for unpaid wages and eligible annual leave and redundancy pay.
So far 225 former Cocoon workers have submitted a back pay claim to the government program, with the Herald Sun reporting that the bill could fetch as high as $20 million if all affected workers made a submission.
The NDIS provider, which has been subject to a National Disability Insurance Agency manual audit of all of its payment claims had over 400 clients and was touted as one of the fastest growing businesses in the country.
Former Cocoon employee Stephen Cooper who has made a submission to the FEG said the lack of pay had left him in a desperate position.
'They stopped paying me the month after I had moved into my home and started paying my mortgage,' Mr Cooper told The Herald Sun.
'I'm two months behind on my loan, I have a personal loan and a car loan.'
Mr Stephens said he was in such strife that he was now borrowing money from friends to afford petrol to travel to and from work.
A former Cocoon manager who spoke on the condition of anonymity said that they were owed a whopping $30,000 in salary remunerations in addition to superannuation payments and that there was no concrete guarantee they would get their hard earned money back.
'I'm furious at not being paid, given the director has taken himself to Pakistan and the corporate strategist (Zaffar Khan) is swanning around like nothing has happened,' the source told The Herald Sun.
The source also blasted the liquidators, and said they had made no contact since they were installed and did not have the details of the affected staff.
A third worker also despaired that despite Cocoon sending her pay slips, there was no money being deposited into her account and said she was therefore unable to apply for Centrelink payments.
Tanya-Lee Quinn, a former senior Cocoon SDA executive who blew the whistle on the company's conduct, stated the firm's bosses should be held responsible for dudding their employees.
'There's no incentive to do the right thing,' she said.
The Department of Employment and Workplace relations confirmed that 'As of 2 July 2025, 225 former employees of Horizon Solsolutions Australia Pty Ltd, formerly trading as Cocoon SDA Care have submitted a claim under the Fair Entitlements Guarantee (FEG)."
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News.com.au
6 days ago
- News.com.au
New earlybird downsizer trend: ‘We have more money and time'
Natalie and Costa Mina always assumed they would downsize eventually, but they didn't expect it to happen so soon. With both of their sons studying overseas, the couple found themselves alone in a large house in Riverview. Curious about the market, they began exploring options and were instantly drawn to the AURA by Aqualand development in North Sydney. They quickly listed their family home and made the move into a new two-bedroom apartment. 'It feels a bit like we're in a resort on holiday living here,' says Natalie, 51. 'The finishings are beautiful and it has a concierge, a 25m pool, a spa, a really well-equipped gym, a rooftop terrace and function spaces you can book out if you want to have a party. 'We have quite a large living space – our dining table seats 12 people and the couch up to eight. 'We have also taken friends up to the community room and there's a big TV projector screen that you can stream on and a pool table.' While their new apartment doesn't offer much space for their sons when they return, the decision to downsize has provided greater financial flexibility – enabling them to help with rent and invest more in activities they enjoy. 'We kind of feel like we are back in the early days of our relationship before having kids,' Natalie says. 'One of the things that goes when you move from a house to an apartment is a lot of the maintenance, so we have more money and time for the things that we used to do. 'We spend it going out and making the most of the Lower North Shore lifestyle.' The Minas are part of a growing trend. Increasingly, financially secure Australians are leaving behind freestanding homes in favour of premium apartments in prime locations that suit their evolving lifestyle needs. Cameron Porter, head of sales at luxury boutique developer Central Element, says 90 per cent of buyers on the Lower North Shore are downsizers. Most are seeking to stay close to family, friends and shops, but still want spacious homes and luxury amenities. 'The mainstream dream of having a quarter-acre block is switching to more vertical living,' he says. 'But a lot of downsizers don't want to be in towers; they want small blocks.' He says developments like Pienza Neutral Bay Village – which offers a wellness centre, gym and rooftop pool – have been especially popular with the demographic. 'The beautiful thing about these guys is it's like that movie Cocoon – they have this real zest for life,' he says. 'They love health and wellbeing, they have a passion to do volunteer work for charities. They're doing a lot of travel so they're security conscious, so having a building manager and concierge is critical.' In the eastern suburbs, demand from downsizers is just as strong. Porter sold an apartment at Central Element's Ballamac House development in Coogee for a record $20m to empty nesters relocating from a house in Bondi in April. Ray White Double Bay sales executive Adam Reichman recently sold the Point Piper mansion of Retail Apparel Group co-founder Stephen Liebowitz and his wife Pam, who went on to buy an off-the-plan penthouse in the luxury Ode building in Double Bay for $24.9m. 'Downsizers are really looking for high-end luxury apartments,' Reichman says. 'Lift access is important to them, as well as a great aspect, a good fitout and fantastic appliances.' He also says that people are starting to think about downsizing earlier than they used to. Debbie Scott is one of them. After clearing out her mother's belongings following her passing last year, and watching friends go through rushed moves, the 59-year-old decided to get ahead of the curve. She and her 63-year-old husband Mike have bought a three-bedroom apartment off-the-plan in the upmarket The Residences at Wahroonga. With two years until completion, they have ample time to declutter from their five-bedroom family home in West Pymble, where they raised four children. 'I just think it's time for the next chapter and I don't want to be forced into the decision where we have to move if one of us gets sick,' Debbie says. 'We decided to do it while we are younger rather than waiting until you're older and you don't want to move. It also gives us time to get ourselves organised.' Research by the developer behind The Residences, Capital Corporation, found that 59 per cent of downsizers in NSW wanted to relocate within 20km of their current home, and 64 per cent were doing so to reduce home maintenance. The Scotts were also drawn to the development's leafy setting – overlooking a national park – and its modest scale. 'It's only five levels so that was appealing to us – it wasn't a huge high-rise,' Debbie says. 'They have a communal barbecue area so if we want to have all the family over there's areas where we can entertain.' The couple has customised the floorplan to convert the third bedroom into a study, supporting their home-based business. Financial planning was another motivator. Australians aged 55 or older can contribute up to $300,000 – or $600,000 per couple – from the sale of their home into their superannuation fund. The eligibility age has steadily dropped over time: from 65 in 2018 to 60 in 2023, and now 55. 'We wanted to have a bit of money behind us for retirement,' Debbie says. That incentive was also a factor for lawyer Scott Laycock and his publicist wife Clare. The couple recently sold their four-bedroom North Randwick home and moved into a three-bedroom apartment at Munro House in Elizabeth Bay. 'The decluttering process was really cathartic,' says Laycock, 60. 'In the apartment everything has its place.' While he admires the charm of Elizabeth Bay's Art Deco buildings, he wanted a newer property that wouldn't require constant maintenance. Downsizing also allowed them to help their daughters financially and to travel, including a recent European trip to celebrate the couple's 30th wedding anniversary and Clare's 60th birthday. But it's not just retirees making the shift. Many families are also increasingly favouring large apartments over houses. Tim Abbott, director of projects and developments at Ray White Lower North Shore, says the new Willoughby Grounds development, which is scheduled for completion in spring, has large floorplans and even a children's playground that appeals to the market. Abbott believes government planning legislation needs to evolve to require more three- and four-bedroom apartments suited to families. 'The larger apartments are definitely striking a chord with downsizers at Willoughby Grounds,' he says. 'The living spaces and kitchen are much bigger than a lot of the other apartments we have sold, there's a lot of storage and the levies are very reasonable. 'For many buyers, it's just to simplify their lives and free up some time to do things that are more enjoyable than maintaining a house.'
The Advertiser
7 days ago
- The Advertiser
Rogue providers run rife in disability support sector
Rampant rule-breaking is going unnoticed within Australia's disability support sector, an industry body says as the workplace watchdog launches a probe into rogue conduct. Less than three per cent of Australia's 260,000 NDIS providers are registered, peak body National Disability Services notes as it welcomes the investigation announced on Tuesday by the Fair Work Ombudsman. "We do not know what is occurring in the unregistered market, because there is no oversight so seeking to understand that is a positive thing," chief executive Michael Perusco told AAP. His organisation has heard of countless instances of poor quality and unregistered providers exploiting staff and participants, he said, also praising the probe for shining a light on those practices. The ombudsman has received tens of thousands of inquiries, anonymous reports, requests for assistance and self-reported breaches each year. Back-payments for workers were close to $68 million between 2020 and 2024, equating to about $13.6 million every year. The peak body has pushed for all National Disability Insurance Scheme providers to be registered in a proportionate system, where regulatory burdens would be higher for services completing complex work. "In the absence of that reform, we are concerned that unsafe practices are going unnoticed," Mr Perusco said. Previous investigations have uncovered widespread and large scale non-compliance in the sector, with ombudsman Anna Booth holding "serious" concerns. The ombudsman aims to identify the root causes of non-compliance then work with industry and government to improve compliance. Key themes of breaches are small and unregistered providers, higher labour costs, an uptick in digital gig platform providers and financial pressures, the ombudsman said. Workers say they face strong demand for their services, high levels of casualisation in a predominantly female workforce, quick staff turnover and tight profit margins. Ms Booth said the sector had relied heavily on migrant workers who are vulnerable to exploitation due to their reluctance to complain, despite having the same rights as other workers. But she warned change won't be instantaneous. The inquiry has been welcomed by the Australian Services Union, the largest group representing disability support workers. "It often feels like a 'whack-a-mole' exercise with underpayments popping up all over the place in this rapidly growing sector," union spokesman Angus McFarland said. The inquiry's first phase will run for 18 months and involve hearing from workers, stakeholders and clients who require disability support. Rampant rule-breaking is going unnoticed within Australia's disability support sector, an industry body says as the workplace watchdog launches a probe into rogue conduct. Less than three per cent of Australia's 260,000 NDIS providers are registered, peak body National Disability Services notes as it welcomes the investigation announced on Tuesday by the Fair Work Ombudsman. "We do not know what is occurring in the unregistered market, because there is no oversight so seeking to understand that is a positive thing," chief executive Michael Perusco told AAP. His organisation has heard of countless instances of poor quality and unregistered providers exploiting staff and participants, he said, also praising the probe for shining a light on those practices. The ombudsman has received tens of thousands of inquiries, anonymous reports, requests for assistance and self-reported breaches each year. Back-payments for workers were close to $68 million between 2020 and 2024, equating to about $13.6 million every year. The peak body has pushed for all National Disability Insurance Scheme providers to be registered in a proportionate system, where regulatory burdens would be higher for services completing complex work. "In the absence of that reform, we are concerned that unsafe practices are going unnoticed," Mr Perusco said. Previous investigations have uncovered widespread and large scale non-compliance in the sector, with ombudsman Anna Booth holding "serious" concerns. The ombudsman aims to identify the root causes of non-compliance then work with industry and government to improve compliance. Key themes of breaches are small and unregistered providers, higher labour costs, an uptick in digital gig platform providers and financial pressures, the ombudsman said. Workers say they face strong demand for their services, high levels of casualisation in a predominantly female workforce, quick staff turnover and tight profit margins. Ms Booth said the sector had relied heavily on migrant workers who are vulnerable to exploitation due to their reluctance to complain, despite having the same rights as other workers. But she warned change won't be instantaneous. The inquiry has been welcomed by the Australian Services Union, the largest group representing disability support workers. "It often feels like a 'whack-a-mole' exercise with underpayments popping up all over the place in this rapidly growing sector," union spokesman Angus McFarland said. The inquiry's first phase will run for 18 months and involve hearing from workers, stakeholders and clients who require disability support. Rampant rule-breaking is going unnoticed within Australia's disability support sector, an industry body says as the workplace watchdog launches a probe into rogue conduct. Less than three per cent of Australia's 260,000 NDIS providers are registered, peak body National Disability Services notes as it welcomes the investigation announced on Tuesday by the Fair Work Ombudsman. "We do not know what is occurring in the unregistered market, because there is no oversight so seeking to understand that is a positive thing," chief executive Michael Perusco told AAP. His organisation has heard of countless instances of poor quality and unregistered providers exploiting staff and participants, he said, also praising the probe for shining a light on those practices. The ombudsman has received tens of thousands of inquiries, anonymous reports, requests for assistance and self-reported breaches each year. Back-payments for workers were close to $68 million between 2020 and 2024, equating to about $13.6 million every year. The peak body has pushed for all National Disability Insurance Scheme providers to be registered in a proportionate system, where regulatory burdens would be higher for services completing complex work. "In the absence of that reform, we are concerned that unsafe practices are going unnoticed," Mr Perusco said. Previous investigations have uncovered widespread and large scale non-compliance in the sector, with ombudsman Anna Booth holding "serious" concerns. The ombudsman aims to identify the root causes of non-compliance then work with industry and government to improve compliance. Key themes of breaches are small and unregistered providers, higher labour costs, an uptick in digital gig platform providers and financial pressures, the ombudsman said. Workers say they face strong demand for their services, high levels of casualisation in a predominantly female workforce, quick staff turnover and tight profit margins. Ms Booth said the sector had relied heavily on migrant workers who are vulnerable to exploitation due to their reluctance to complain, despite having the same rights as other workers. But she warned change won't be instantaneous. The inquiry has been welcomed by the Australian Services Union, the largest group representing disability support workers. "It often feels like a 'whack-a-mole' exercise with underpayments popping up all over the place in this rapidly growing sector," union spokesman Angus McFarland said. The inquiry's first phase will run for 18 months and involve hearing from workers, stakeholders and clients who require disability support. Rampant rule-breaking is going unnoticed within Australia's disability support sector, an industry body says as the workplace watchdog launches a probe into rogue conduct. Less than three per cent of Australia's 260,000 NDIS providers are registered, peak body National Disability Services notes as it welcomes the investigation announced on Tuesday by the Fair Work Ombudsman. "We do not know what is occurring in the unregistered market, because there is no oversight so seeking to understand that is a positive thing," chief executive Michael Perusco told AAP. His organisation has heard of countless instances of poor quality and unregistered providers exploiting staff and participants, he said, also praising the probe for shining a light on those practices. The ombudsman has received tens of thousands of inquiries, anonymous reports, requests for assistance and self-reported breaches each year. Back-payments for workers were close to $68 million between 2020 and 2024, equating to about $13.6 million every year. The peak body has pushed for all National Disability Insurance Scheme providers to be registered in a proportionate system, where regulatory burdens would be higher for services completing complex work. "In the absence of that reform, we are concerned that unsafe practices are going unnoticed," Mr Perusco said. Previous investigations have uncovered widespread and large scale non-compliance in the sector, with ombudsman Anna Booth holding "serious" concerns. The ombudsman aims to identify the root causes of non-compliance then work with industry and government to improve compliance. Key themes of breaches are small and unregistered providers, higher labour costs, an uptick in digital gig platform providers and financial pressures, the ombudsman said. Workers say they face strong demand for their services, high levels of casualisation in a predominantly female workforce, quick staff turnover and tight profit margins. Ms Booth said the sector had relied heavily on migrant workers who are vulnerable to exploitation due to their reluctance to complain, despite having the same rights as other workers. But she warned change won't be instantaneous. The inquiry has been welcomed by the Australian Services Union, the largest group representing disability support workers. "It often feels like a 'whack-a-mole' exercise with underpayments popping up all over the place in this rapidly growing sector," union spokesman Angus McFarland said. The inquiry's first phase will run for 18 months and involve hearing from workers, stakeholders and clients who require disability support.
The Advertiser
25-07-2025
- The Advertiser
You know what's a bigger issue than productivity? This culture of entitlement
As we get closer to the productivity roundtable that the government hopes will solve all problems, various players are tipping their hand as to what they want the focus to be. Unfortunately, many commentators on the left have indicated the focus should be squarely on increasing taxation - both to close the existing budget deficit and to fund additional government spending. It has been clear for some time that the Treasurer is sympathetic to calls for an expanded role for government. His much-cited essay on the future of capitalism outlined a vision of government returning to the centre of the economy, using taxpayer funds to direct and shape economic priorities. This is a bad idea; both on its merits, and in terms of its negative impact on productivity. The fact is government has been steadily growing in both its expenditure and regulatory dimensions for years now and each of these are a drain on productivity. Focusing on expenditure, a full tally for all levels of government shows expenditure at 38.3 per cent of GDP in 2023-24 and it is likely to have been higher in 2024-25, perhaps approaching 39 per cent. The same measure before the coronavirus pandemic was usually in the range 34-35 per cent of GDP. Pandemic-era spending led to a spike above 40 per cent for two years. However, true to the then-government's word, most of that spending was temporary. The huge deficits of that era did leave a legacy in the form of ongoing interest expense on the resulting public debt. But otherwise, the pandemic can't be blamed for expenditure now being about 4 percentage points of GDP higher than before it. That is a massive $100 billion plus, every year. These increases have happened mainly at the federal level, although a good portion of the additional expenditure amounts to the federal government effectively bankrolling state expenditures and responsibilities. An examination of program expenditure points to the seeds of increased federal spending being sown long ago. Looking back to 2012-13 we see the rapid growth of expenses on disability support (the NDIS), aged care, child care, schools, public hospitals, pharmaceutical benefits and medical benefits - all programs that have been boosted by new policy initiatives since 2012-13 to roll out new social benefits or enhance existing ones. The welfare state has been on a roll, but in addition defence and funding of state infrastructure projects have increased rapidly, as has debt interest expense as a result of the budget deficits. All these programs together accounted for 35 per cent of federal own-purpose expenditure in 2012-13 but for 63 per cent of the dollar increase in annual expenditure up to 2024-25. Each item has its own story, and we wouldn't suggest that the growth was all avoidable. For example, some of it reflects population ageing and the increase in defence is a normalisation from a historically low level. However, the growth in social spending also includes wasteful and ineffective spending. That growth reflects the priorities of an earlier Labor government, and the subsequent Coalition government largely went along with it or felt they had to. Unfortunately, this political dynamic has created a situation where the main sources of growth in terms of employment and spending in the economy have been focused in areas that are relatively low productivity (the care economy in particular). To make matters worse, the current Labor government is doubling down on its previous spending increases in most areas. Aged care, childcare and Medicare are all areas where the government has unveiled substantial new spending commitments. The government has agreed to increase its share of Gonski school funding. And it has promised or hopes to go further with "free" TAFE and universal child care, while pressures for further increases in defence can be expected. READ MORE SIMON COWAN: Of course, this additional spending, though significant in its own right, is dwarfed by the growing costs of the NDIS. The CIS warned long ago that the NDIS was likely to grow far faster than had been predicted at the time. Despite these prescient warnings, both sides of politics have made only modest efforts to rein in the NDIS monster. Consequently, there are good reasons to be sceptical of rosy predictions of the NDIS cost-curve flattening (although staying at a level well above the growth of the economy) without substantial intervention. It should be noted as well, that despite the rapidly burgeoning costs, many participants and providers in the scheme report dissatisfaction with how the scheme is being managed. While increases in spending in individual programs and areas are the measure of the increase in the size of government, this is not the root cause. The bigger issue is the culture of dependency and entitlement has taken root in the population and political behaviour has become only too willing to accommodate and encourage it. We have reached a point where a sizeable proportion of the voting age population - perhaps more than half - is dependent on government directly or indirectly through social benefits and employment for most of their income. It is difficult to see the current government reversing this trend without a major change of mindset. While there is some hope for the broader centre left of politics in movements like the "abundance agenda", left-wing parties across the Western world have become the parties of higher taxes and bigger government. Despite the political difficulties, the economic and social consequences of the growth in government spending and dependency on government will have to be faced one day. The economic consequences include the unrelenting pressure for more deficits and more debt, which will make the economy more vulnerable to future crises and the government less able to respond. Governments' insatiable appetite for revenue also creates more pressure for taxes to rise, which in turn saps incentives for work, saving and investment - and thereby potentially compounds the problem of weak productivity growth. The simple fact is that people respond to incentives. When the incentives encourage innovation, investment and ingenuity, people respond by increasing productivity. Our living standards grow. However, when the incentives encourage us to fight over the distribution of the pie, even as it shrinks, the rot of entitlement and waste sinks in. Turning this around will require more than a summit. As we get closer to the productivity roundtable that the government hopes will solve all problems, various players are tipping their hand as to what they want the focus to be. Unfortunately, many commentators on the left have indicated the focus should be squarely on increasing taxation - both to close the existing budget deficit and to fund additional government spending. It has been clear for some time that the Treasurer is sympathetic to calls for an expanded role for government. His much-cited essay on the future of capitalism outlined a vision of government returning to the centre of the economy, using taxpayer funds to direct and shape economic priorities. This is a bad idea; both on its merits, and in terms of its negative impact on productivity. The fact is government has been steadily growing in both its expenditure and regulatory dimensions for years now and each of these are a drain on productivity. Focusing on expenditure, a full tally for all levels of government shows expenditure at 38.3 per cent of GDP in 2023-24 and it is likely to have been higher in 2024-25, perhaps approaching 39 per cent. The same measure before the coronavirus pandemic was usually in the range 34-35 per cent of GDP. Pandemic-era spending led to a spike above 40 per cent for two years. However, true to the then-government's word, most of that spending was temporary. The huge deficits of that era did leave a legacy in the form of ongoing interest expense on the resulting public debt. But otherwise, the pandemic can't be blamed for expenditure now being about 4 percentage points of GDP higher than before it. That is a massive $100 billion plus, every year. These increases have happened mainly at the federal level, although a good portion of the additional expenditure amounts to the federal government effectively bankrolling state expenditures and responsibilities. An examination of program expenditure points to the seeds of increased federal spending being sown long ago. Looking back to 2012-13 we see the rapid growth of expenses on disability support (the NDIS), aged care, child care, schools, public hospitals, pharmaceutical benefits and medical benefits - all programs that have been boosted by new policy initiatives since 2012-13 to roll out new social benefits or enhance existing ones. The welfare state has been on a roll, but in addition defence and funding of state infrastructure projects have increased rapidly, as has debt interest expense as a result of the budget deficits. All these programs together accounted for 35 per cent of federal own-purpose expenditure in 2012-13 but for 63 per cent of the dollar increase in annual expenditure up to 2024-25. Each item has its own story, and we wouldn't suggest that the growth was all avoidable. For example, some of it reflects population ageing and the increase in defence is a normalisation from a historically low level. However, the growth in social spending also includes wasteful and ineffective spending. That growth reflects the priorities of an earlier Labor government, and the subsequent Coalition government largely went along with it or felt they had to. Unfortunately, this political dynamic has created a situation where the main sources of growth in terms of employment and spending in the economy have been focused in areas that are relatively low productivity (the care economy in particular). To make matters worse, the current Labor government is doubling down on its previous spending increases in most areas. Aged care, childcare and Medicare are all areas where the government has unveiled substantial new spending commitments. The government has agreed to increase its share of Gonski school funding. And it has promised or hopes to go further with "free" TAFE and universal child care, while pressures for further increases in defence can be expected. READ MORE SIMON COWAN: Of course, this additional spending, though significant in its own right, is dwarfed by the growing costs of the NDIS. The CIS warned long ago that the NDIS was likely to grow far faster than had been predicted at the time. Despite these prescient warnings, both sides of politics have made only modest efforts to rein in the NDIS monster. Consequently, there are good reasons to be sceptical of rosy predictions of the NDIS cost-curve flattening (although staying at a level well above the growth of the economy) without substantial intervention. It should be noted as well, that despite the rapidly burgeoning costs, many participants and providers in the scheme report dissatisfaction with how the scheme is being managed. While increases in spending in individual programs and areas are the measure of the increase in the size of government, this is not the root cause. The bigger issue is the culture of dependency and entitlement has taken root in the population and political behaviour has become only too willing to accommodate and encourage it. We have reached a point where a sizeable proportion of the voting age population - perhaps more than half - is dependent on government directly or indirectly through social benefits and employment for most of their income. It is difficult to see the current government reversing this trend without a major change of mindset. While there is some hope for the broader centre left of politics in movements like the "abundance agenda", left-wing parties across the Western world have become the parties of higher taxes and bigger government. Despite the political difficulties, the economic and social consequences of the growth in government spending and dependency on government will have to be faced one day. The economic consequences include the unrelenting pressure for more deficits and more debt, which will make the economy more vulnerable to future crises and the government less able to respond. Governments' insatiable appetite for revenue also creates more pressure for taxes to rise, which in turn saps incentives for work, saving and investment - and thereby potentially compounds the problem of weak productivity growth. The simple fact is that people respond to incentives. When the incentives encourage innovation, investment and ingenuity, people respond by increasing productivity. Our living standards grow. However, when the incentives encourage us to fight over the distribution of the pie, even as it shrinks, the rot of entitlement and waste sinks in. Turning this around will require more than a summit. As we get closer to the productivity roundtable that the government hopes will solve all problems, various players are tipping their hand as to what they want the focus to be. Unfortunately, many commentators on the left have indicated the focus should be squarely on increasing taxation - both to close the existing budget deficit and to fund additional government spending. It has been clear for some time that the Treasurer is sympathetic to calls for an expanded role for government. His much-cited essay on the future of capitalism outlined a vision of government returning to the centre of the economy, using taxpayer funds to direct and shape economic priorities. This is a bad idea; both on its merits, and in terms of its negative impact on productivity. The fact is government has been steadily growing in both its expenditure and regulatory dimensions for years now and each of these are a drain on productivity. Focusing on expenditure, a full tally for all levels of government shows expenditure at 38.3 per cent of GDP in 2023-24 and it is likely to have been higher in 2024-25, perhaps approaching 39 per cent. The same measure before the coronavirus pandemic was usually in the range 34-35 per cent of GDP. Pandemic-era spending led to a spike above 40 per cent for two years. However, true to the then-government's word, most of that spending was temporary. The huge deficits of that era did leave a legacy in the form of ongoing interest expense on the resulting public debt. But otherwise, the pandemic can't be blamed for expenditure now being about 4 percentage points of GDP higher than before it. That is a massive $100 billion plus, every year. These increases have happened mainly at the federal level, although a good portion of the additional expenditure amounts to the federal government effectively bankrolling state expenditures and responsibilities. An examination of program expenditure points to the seeds of increased federal spending being sown long ago. Looking back to 2012-13 we see the rapid growth of expenses on disability support (the NDIS), aged care, child care, schools, public hospitals, pharmaceutical benefits and medical benefits - all programs that have been boosted by new policy initiatives since 2012-13 to roll out new social benefits or enhance existing ones. The welfare state has been on a roll, but in addition defence and funding of state infrastructure projects have increased rapidly, as has debt interest expense as a result of the budget deficits. All these programs together accounted for 35 per cent of federal own-purpose expenditure in 2012-13 but for 63 per cent of the dollar increase in annual expenditure up to 2024-25. Each item has its own story, and we wouldn't suggest that the growth was all avoidable. For example, some of it reflects population ageing and the increase in defence is a normalisation from a historically low level. However, the growth in social spending also includes wasteful and ineffective spending. That growth reflects the priorities of an earlier Labor government, and the subsequent Coalition government largely went along with it or felt they had to. Unfortunately, this political dynamic has created a situation where the main sources of growth in terms of employment and spending in the economy have been focused in areas that are relatively low productivity (the care economy in particular). To make matters worse, the current Labor government is doubling down on its previous spending increases in most areas. Aged care, childcare and Medicare are all areas where the government has unveiled substantial new spending commitments. The government has agreed to increase its share of Gonski school funding. And it has promised or hopes to go further with "free" TAFE and universal child care, while pressures for further increases in defence can be expected. READ MORE SIMON COWAN: Of course, this additional spending, though significant in its own right, is dwarfed by the growing costs of the NDIS. The CIS warned long ago that the NDIS was likely to grow far faster than had been predicted at the time. Despite these prescient warnings, both sides of politics have made only modest efforts to rein in the NDIS monster. Consequently, there are good reasons to be sceptical of rosy predictions of the NDIS cost-curve flattening (although staying at a level well above the growth of the economy) without substantial intervention. It should be noted as well, that despite the rapidly burgeoning costs, many participants and providers in the scheme report dissatisfaction with how the scheme is being managed. While increases in spending in individual programs and areas are the measure of the increase in the size of government, this is not the root cause. The bigger issue is the culture of dependency and entitlement has taken root in the population and political behaviour has become only too willing to accommodate and encourage it. We have reached a point where a sizeable proportion of the voting age population - perhaps more than half - is dependent on government directly or indirectly through social benefits and employment for most of their income. It is difficult to see the current government reversing this trend without a major change of mindset. While there is some hope for the broader centre left of politics in movements like the "abundance agenda", left-wing parties across the Western world have become the parties of higher taxes and bigger government. Despite the political difficulties, the economic and social consequences of the growth in government spending and dependency on government will have to be faced one day. The economic consequences include the unrelenting pressure for more deficits and more debt, which will make the economy more vulnerable to future crises and the government less able to respond. Governments' insatiable appetite for revenue also creates more pressure for taxes to rise, which in turn saps incentives for work, saving and investment - and thereby potentially compounds the problem of weak productivity growth. The simple fact is that people respond to incentives. When the incentives encourage innovation, investment and ingenuity, people respond by increasing productivity. Our living standards grow. However, when the incentives encourage us to fight over the distribution of the pie, even as it shrinks, the rot of entitlement and waste sinks in. Turning this around will require more than a summit. As we get closer to the productivity roundtable that the government hopes will solve all problems, various players are tipping their hand as to what they want the focus to be. Unfortunately, many commentators on the left have indicated the focus should be squarely on increasing taxation - both to close the existing budget deficit and to fund additional government spending. It has been clear for some time that the Treasurer is sympathetic to calls for an expanded role for government. His much-cited essay on the future of capitalism outlined a vision of government returning to the centre of the economy, using taxpayer funds to direct and shape economic priorities. This is a bad idea; both on its merits, and in terms of its negative impact on productivity. The fact is government has been steadily growing in both its expenditure and regulatory dimensions for years now and each of these are a drain on productivity. Focusing on expenditure, a full tally for all levels of government shows expenditure at 38.3 per cent of GDP in 2023-24 and it is likely to have been higher in 2024-25, perhaps approaching 39 per cent. The same measure before the coronavirus pandemic was usually in the range 34-35 per cent of GDP. Pandemic-era spending led to a spike above 40 per cent for two years. However, true to the then-government's word, most of that spending was temporary. The huge deficits of that era did leave a legacy in the form of ongoing interest expense on the resulting public debt. But otherwise, the pandemic can't be blamed for expenditure now being about 4 percentage points of GDP higher than before it. That is a massive $100 billion plus, every year. These increases have happened mainly at the federal level, although a good portion of the additional expenditure amounts to the federal government effectively bankrolling state expenditures and responsibilities. An examination of program expenditure points to the seeds of increased federal spending being sown long ago. Looking back to 2012-13 we see the rapid growth of expenses on disability support (the NDIS), aged care, child care, schools, public hospitals, pharmaceutical benefits and medical benefits - all programs that have been boosted by new policy initiatives since 2012-13 to roll out new social benefits or enhance existing ones. The welfare state has been on a roll, but in addition defence and funding of state infrastructure projects have increased rapidly, as has debt interest expense as a result of the budget deficits. All these programs together accounted for 35 per cent of federal own-purpose expenditure in 2012-13 but for 63 per cent of the dollar increase in annual expenditure up to 2024-25. Each item has its own story, and we wouldn't suggest that the growth was all avoidable. For example, some of it reflects population ageing and the increase in defence is a normalisation from a historically low level. However, the growth in social spending also includes wasteful and ineffective spending. That growth reflects the priorities of an earlier Labor government, and the subsequent Coalition government largely went along with it or felt they had to. Unfortunately, this political dynamic has created a situation where the main sources of growth in terms of employment and spending in the economy have been focused in areas that are relatively low productivity (the care economy in particular). To make matters worse, the current Labor government is doubling down on its previous spending increases in most areas. Aged care, childcare and Medicare are all areas where the government has unveiled substantial new spending commitments. The government has agreed to increase its share of Gonski school funding. And it has promised or hopes to go further with "free" TAFE and universal child care, while pressures for further increases in defence can be expected. READ MORE SIMON COWAN: Of course, this additional spending, though significant in its own right, is dwarfed by the growing costs of the NDIS. The CIS warned long ago that the NDIS was likely to grow far faster than had been predicted at the time. Despite these prescient warnings, both sides of politics have made only modest efforts to rein in the NDIS monster. Consequently, there are good reasons to be sceptical of rosy predictions of the NDIS cost-curve flattening (although staying at a level well above the growth of the economy) without substantial intervention. It should be noted as well, that despite the rapidly burgeoning costs, many participants and providers in the scheme report dissatisfaction with how the scheme is being managed. While increases in spending in individual programs and areas are the measure of the increase in the size of government, this is not the root cause. The bigger issue is the culture of dependency and entitlement has taken root in the population and political behaviour has become only too willing to accommodate and encourage it. We have reached a point where a sizeable proportion of the voting age population - perhaps more than half - is dependent on government directly or indirectly through social benefits and employment for most of their income. It is difficult to see the current government reversing this trend without a major change of mindset. While there is some hope for the broader centre left of politics in movements like the "abundance agenda", left-wing parties across the Western world have become the parties of higher taxes and bigger government. Despite the political difficulties, the economic and social consequences of the growth in government spending and dependency on government will have to be faced one day. The economic consequences include the unrelenting pressure for more deficits and more debt, which will make the economy more vulnerable to future crises and the government less able to respond. Governments' insatiable appetite for revenue also creates more pressure for taxes to rise, which in turn saps incentives for work, saving and investment - and thereby potentially compounds the problem of weak productivity growth. The simple fact is that people respond to incentives. When the incentives encourage innovation, investment and ingenuity, people respond by increasing productivity. Our living standards grow. However, when the incentives encourage us to fight over the distribution of the pie, even as it shrinks, the rot of entitlement and waste sinks in. Turning this around will require more than a summit.
