Advocates warn if nothing is done, the sector will have difficulty providing people living with a disability with the services they need.
The State of the Disability Sector Survey 2022, commissioned by peak industry body National Disability Services (NDS), revealed a "concerning" outlook facing providers.
The survey found uncertainty in the sector had been magnified by too few workers, too much red tape and wider fears about the state of the economy.
But there was also a sense of optimism about the federal government's proposed reforms to the National Disability Insurance Scheme (NDIS).
More than 40 per cent of survey respondents thought policy changes were going in the right direction, compared to 25 per cent last year.
Yet this was tempered by a grim economic reality of growing inflation and low workforce numbers.
Around 80 per cent of providers said that they had received requests for disability services that they had not been able to fulfil.
Many providers are also feeling the effects of workforce shortages facing industries across Australia and reported difficulties in recruiting and retaining staff.
Constant changes to NDIS policies are causing worker fatigue with people exhausted by the challenge learning new systems and processes.
NDS chief Laurie Leigh told AAP one of the main themes raised by multiple providers was the need to align regulation and reporting.
She said at the moment providers sometimes need to report one incident to multiple state or territory departments as well as at a federal level which is creating a significant administration burden and confusion.
"Reviewing and reducing the amount of unnecessary reporting would be an easy step to reduce red tape," Ms Leigh said.
"If not addressed, excess red tape and disincentives for innovation will also have a long-term effect on the ability of the sector to be sustainable and meet demand for new and better services."
Ms Leigh said it was "particularly concerning" that many more providers are expecting to make a loss this year.
"What we want from governments is to see plans turned into action," she said.
"Commissions and enquiries and consultation are only good if they lead to improvements.
"Solutions need to simplify and streamline the system, not complicate it further, and reform should be progressively implemented to maintain momentum."
16°C