An illustrative composite, not a real participant: Sarah attends a weekly art group funded by her NDIS social participation budget. It is her only regular outing. When her plan is next reassessed or renewed, her funding in this category could fall from the average of about $33,000 to about $26,000. She does not know if the group will survive.
Sarah is a composite, but the change is real. On 1 October 2026, the first phase of the government's NDIS budget cuts took effect. Here is what the Budget papers, NDIS statements, and disability advocates actually show.
What changed on 1 October 2026
From 1 October, the NDIS began reducing participant budgets in two categories: social, economic and community participation (affected budget allocations cut by 50%) and improved daily living skills (cut by 10%). These are not cuts to whole plans. The cuts are phased in over 12 months as participant plans renew or are reassessed.
Average social and community participation funding will fall from about $33,000 to about $26,000 per participant (ABC, April 2026), returning to 2023 levels. That is a fall of about a fifth in the average, not a half: the 50% applies to the affected budget allocations, not to every dollar in the category or the whole plan. What does that funding pay for? Disability advocates say it pays for group activities, day programs, and supported outings. For some participants, it is their only regular social interaction outside family.
The cuts are part of the government's plan to reduce NDIS spending growth. The 2026-27 Budget projects the reforms will save $37.8 billion over four years, compared to the NDIS Actuary's baseline projections. Participant numbers are expected to drop from around 770,000 today to approximately 600,000 by 2030 as eligibility tightens and funding falls.
The strongest case for NDIS reform
Why the government says the cuts are necessary
The NDIS is growing faster than any comparable government program. It grew at 23% per year under the Coalition and was still growing at 11% in the 12 months to March 2026. Without reform, the scheme is projected to cost $97 billion by 2030-31—more than the total cost of Medicare.
NDIS spending has risen from 1.2% of GDP in the decade before the scheme to 1.7% in 2024-25, and is projected to reach 2.1% by 2033-34. The 2023 Intergenerational Report warned that without reform, NDIS spending could hit 6.3% of GDP by 2062. That is higher than the projection for health spending over the same period.
Bill Shorten, then NDIS Minister, said in December 2024 that the government had slowed the growth rate from 23% per year and was on track for 8% by 1 July 2026. His successor in the portfolio, Mark Butler, now aims to reduce it further to 2% by 2029-30. The government argues the scheme must be saved from its own growth to survive for future generations.
The government also points to broader fiscal pressures. Total Commonwealth spending reached 26.9% of GDP in 2025-26, the highest since 1986-87 outside the pandemic. The NDIS is one of the fastest-growing pressures on the federal budget, and the Reserve Bank counts every dollar of public spending in the total demand it is trying to cool with interest rate rises.
On the numbers, the case for reform is strong. The NDIS growth rate was genuinely unsustainable, and the scheme's trajectory threatened both the federal budget and the broader economy.
The evidence on what is being cut and why
The October 1 cuts target two spending categories. Social, economic and community participation budgets are reduced by 50%, returning to 2023 levels. Improved daily living skills budgets are reduced by 10%. Both cuts are applied as plans renew or are reassessed, phased in over about 12 months.
For context, NDIS spending was $48.5 billion in 2024-25, equivalent to 1.7% of GDP. The scheme covered about 782,000 participants at 30 June 2026, up from about 774,000 at 31 March (the number has grown from around 500,000 in 2022). The government expects participant numbers to fall to approximately 600,000 by 2030 as eligibility criteria tighten and some participants exit the scheme.
The Parliamentary Budget Office projects NDIS expenses at $56.1 billion in 2026-27, falling to $55.1 billion in 2027-28 before rising slightly to $56.2 billion in 2029-30. That is a flat or declining budget in nominal terms over four years—an extraordinary brake on a program that was growing at double-digit rates.
The government's target is to reduce the annual NDIS growth rate from 11% (as of March 2026) to 2% by 2029-30. That would bring NDIS growth in line with long-term GDP growth and make the scheme fiscally sustainable over the coming decades.
The NDIS growth rate was unsustainable. The question is whether the government's chosen path—cut first, build later—is the right one.
The critique: cutting before the alternative exists
The government is right that the NDIS growth rate was unsustainable. The critique is not that reform is happening, but how it is being done.
Participation support budgets are being cut from October 2026. But the functional capacity assessment framework that will determine future NDIS eligibility does not commence until January 2028. And the Foundational Supports—community-based services meant to replace what is being cut from the NDIS—are not yet designed, not yet funded in practice, and not yet operational.
Disability advocates warn the cuts risk greater isolation for people who depend on these supports to stay connected. ABC News reported in April 2026 that participants face $7,000 cuts to social funding that could reduce their "only interaction with the outside world." The October cuts make that risk real.
People with Disability Australia opposed the funding reductions, citing concerns about what they could mean for "the independence, safety, participation and lives of people with disability." Advocacy for Inclusion warned that the closure of local NDIS programs in the leadup to the October cuts does not bode well for the disability community.
The sequencing problem is clear. The government is cutting now—reducing budgets, tightening eligibility, and pushing participants out of the scheme—while building the replacement later. Participants who lose NDIS funding in the next 12 months will do so without knowing whether an alternative support will exist, let alone whether it will be adequate.
That is the fairness question. The scheme needed reform. But did the reform need to start with cuts to participants' social connection before the promised community supports were ready?
What the government got right
Give credit where it is due. The NDIS was growing at 23% per year when Labor took office in May 2022. The government has slowed that growth to an expected 8% by July 2026 without collapsing the scheme. That is a significant achievement in a politically fraught area.
The reform also includes structural changes beyond cuts. The government has legislated a growth cap, tightened gatekeeping to ensure only people who meet the disability threshold enter the scheme, and committed to building Foundational Supports for people who need help but do not meet the NDIS criteria.
On the broader fiscal position, the government delivered two budget surpluses in 2022-23 and 2023-24, and the 2025-26 deficit came in at $22.3 billion, better than forecast. While the deficit improvement came mostly from higher tax revenue rather than spending restraint, the government can claim fiscal discipline in some areas.
Finally, the government is attempting to preserve the NDIS for the long term. If the scheme had continued growing at 23% per year, it would eventually have consumed an unsustainable share of the federal budget and faced a much harsher reckoning. Slowing growth now, however painful, may save the scheme from collapse later.
The risk to the future
What happens if Foundational Supports do not materialize
The October cuts are a bet. The government is betting that Foundational Supports—community-based services for people who need help but do not meet the NDIS threshold—will materialize in time to catch participants who are pushed out of the scheme or see their budgets slashed.
If that bet fails, the consequences are measurable. Increased social isolation for people with disability. Greater burden on family carers, many of whom are already stretched. Potential deterioration in mental health and wellbeing for participants who lose their only regular social connection.
There is also a political risk. If the cuts cause visible harm before the alternatives are in place, the NDIS reform loses public support and becomes politically unsustainable. That would make future reforms harder, not easier, and could lock in a status quo that serves neither participants nor the budget.
The government inherited an unsustainable scheme. It chose to cut first and build later. The next two years will show whether that choice was necessary or reckless.
Your questions, answered
What are the NDIS budget cuts starting October 2026?
On 1 October 2026, the NDIS began reducing social and community participation budgets by 50% and daily living skills budgets by 10% as participant plans renew over 12 months. The cuts are part of a $37.8 billion savings plan over four years.
Why is the government cutting NDIS funding?
The NDIS was growing at 23% per year under the Coalition and is projected to cost $97 billion by 2030-31 without reform. The government argues the scheme must be reformed to remain sustainable.
How much does the NDIS cost the federal budget?
NDIS spending was $48.5 billion in 2024-25, equivalent to 1.7% of GDP. It is projected to reach 2.1% of GDP by 2033-34. Without reform, it could hit 6.3% of GDP by 2062 (2023 Intergenerational Report).
What is NDIS social and community participation funding?
It pays for group activities, day programs, and supported outings. Disability advocates say for some participants this is their only regular social interaction outside family. Average funding will fall from about $33,000 to about $26,000 per participant.
Will NDIS cuts increase social isolation for disabled people?
Disability advocates warn the cuts risk greater isolation for people who depend on these supports to stay connected. The concern is heightened because the cuts started in October 2026, while Foundational Supports are not yet operational and the functional capacity assessment framework does not commence until January 2028.
When will Foundational Supports be available?
Foundational Supports are not yet designed, funded in practice, or operational as of October 2026. The functional capacity assessment framework that will determine NDIS eligibility does not commence until January 2028.
For the full story of the government's fiscal pressures, read Is Albanese government spending pushing up your interest rates? The pages on the spending ratchet and the structural deficit cover the broader budget context.