On 16 April, the Australian Financial Review reported that federal spending has risen to 26.9% of GDP under Labor — near a 40-year high — driven by an accelerating shift from Australia's traditionally targeted welfare system toward a European-style universal model, with the $52 billion NDIS at its centre.
The NDIS trajectory is a case study in institutional governance failure. A Productivity Commission estimate of $14 billion has become $52 billion in annual spending, growing at more than 10% per annum, on track for $100 billion next decade without intervention. Two governments presided over that trajectory without making material corrections. The oversight mechanisms — parliamentary scrutiny, budget processes, ministerial accountability — produced recommendations that were repeatedly deferred for political reasons. That is not bad luck. That is a governance system that failed to do the one thing governance exists to do: apply constraint when an institution drifts from its stated purpose.
For boards of private and listed organisations, the more immediate issue is the macro environment this fiscal trajectory creates. The Parliamentary Budget Office projects the average tax rate on workers will rise from 24.5% to 27.8% of income by 2036 through bracket creep alone. The GST remains politically untouchable. Capital gains discount and negative gearing reform is on the table. And the income tax base — which the e61 Institute describes as "approaching its limits" — is the only real lever being pulled. Boards that are not stress-testing their strategies against a higher-tax, lower-growth scenario, and the workforce participation and consumer demand implications that follow, are operating blind.
- Have we modelled the impact of bracket creep and a potential 2–3 percentage point rise in average income tax rates on our workforce costs and retention over the next five years?
- Our capital structure currently assumes existing treatment for CGT discount and negative gearing — if either changes, what does that do to our asset base and weighted cost of capital?
- If government spending reaches 28% of GDP and growth slows to 1.5–2% as European comparators suggest, what does that do to the top-line assumptions in our three-year strategic plan?
- What is our exposure to sectors that have been growing on the back of government-subsidised demand — disability, aged care, childcare, higher education — and have we stress-tested what a funding pullback looks like?
- The NDIS ran from a $14 billion estimate to $52 billion without a meaningful course correction — do we have any capital commitments where cost trajectories have become disconnected from the governance mechanisms that are supposed to constrain them?
- If 160,000 NDIS participants are shifted off the scheme and that disrupts the care workforce, what does it mean for our access to services-adjacent talent?
- A strategic plan built on stale fiscal assumptions. If your three-year plan uses GDP growth assumptions above 2.5% and stable tax settings, it was likely built before the PBO's bracket creep projections were absorbed. That is an assumption risk directors should surface now.
- Sector concentration in government-funded adjacencies. Organisations with significant revenue exposure to disability, aged care, childcare, or health face a double risk: demand compression if funding is rationalised, and workforce disruption as the sector rebalances. This is not hypothetical — 160,000 NDIS participants are being moved off the scheme.
- Tax base pressure on talent costs. A rising average income tax rate from 24.5% to 27.8% by 2036 will affect what employees demand in gross compensation. That is a headcount cost pressure that does not appear in current wage growth assumptions.
- No KRI for macro fiscal shift. Most risk registers treat macroeconomic risk as a single category with "monitor" as the response. If your board has no early-warning indicator tied to fiscal settings — PBO projections, bracket creep data, CGT reform timing — your emerging risk monitoring is lagging the actual risk by years.
The risk is real and the timing is not abstract. Australia's fiscal path is visible in the budget papers: debt through $1 trillion, personal income tax approaching record highs, and a $52 billion program growing faster than the tax base that funds it. The structural reforms that would address it — GST broadening, means-testing of universal programs, productivity-oriented deregulation — are politically unavailable in the near term.
The opportunity lies in early positioning. Organisations that move now on workforce planning assumptions, stress-test capital structures against realistic tax reform scenarios, and reduce concentration in government-funded sectors will be better placed than those that wait for a budget emergency to recalibrate. The boards asking these questions in 2026 will be well ahead of those asking them in 2028.
Every board in Australia should add one agenda item in the next two quarters: a deliberate stress test of the strategic plan against a higher-tax, lower-growth scenario aligned with the PBO projections. Not a sensitivity analysis buried in a CFO paper — a proper board conversation about which assumptions are most exposed to fiscal tightening, what the off-ramp looks like if growth underperforms, and whether capital allocation decisions remain rational under those conditions. The NDIS case study should also prompt a sharper internal question: do we have any programs or commitments where cost trajectories have become disconnected from the governance mechanisms that are supposed to constrain them? If the Commonwealth can run a $14 billion estimate to $52 billion without meaningful correction, a board that is not asking that same question of its own capital commitments is not doing its job.
Researched and drafted by Brad's agentic AI team. Edited and published by Brad Ferris.