The Rudd Government’s first Budget will deliver a surplus of $21.7 billion in 2008–09, the highest surplus as a percentage of GDP for over a decade.
Financial Assistance Grants
Financial Assistance Grants (FAGs) to Local Government will increase in 2008–09 by 4.59 per cent to $1,860 million ($1,288 million in General Purpose Grants and $571.5 million as untied local roads grants) an estimated $81.7 million above the current financial year.
There is supplementary funding to South Australia (SA) councils for local roads of $14.2 million in 2008–09.
FAGs funding, excluding SA roads, represents 0.62 per cent of total Commonwealth taxation revenue.
Total direct funding for Local Government in 2008–09, including FAGs, Roads to Recovery and other Specific Purpose Payments (SPPs), will be $2,547.8 million.
Nation Building Infrastructure
There is a commitment to Nation Building Infrastructure of $3.2 billion in 2008–09 for a range of nation building road and rail initiatives that will include connecting freight corridors in regional areas to local roads.
In addition, three new infrastructure funds were announced providing around $40 billion for capital investment in infrastructure, education and health:
- •$20 billion in a new Building Australia Fund to finance
roads, ports, rail and broadband, funding from 2007–08
and 2008–09 surpluses, once realised. An allocation of
$75 million will be made before 30 June 2008 for
immediate feasibility studies on high priority transport
projects across Australia. - $11 billion in a new Education Fund to finance skills,
TAFE colleges and universities. - $10 billion in a new Health and Hospitals Fund to finance
improvements in the health and hospital system.
“The Building Australia Fund to be overseen by Infrastructure Australia promises a new era in Australia infrastructure investment,” said Australian Local Government Association President, Councillor Bell.
“Local Government welcomes this initiative as a sensible investment of budget surpluses that will stand Australia in good stead in the long term.”
In addition to the Building Australia Fund, the Government will invest $22.3 billion in land transport infrastructure from 2009–10 to 2013–14 under Auslink2.
A new Regional and Local Community Infrastructure Program from 2009–10 to invest in the future of regional communities was announced, however details of this will be provided next year. This is in addition to $176 million over four years under the Better Regions Program.
Tax system review
The ‘Australia’s Future Tax System’ review, described by the Treasurer as the most comprehensive review of our tax system since World War 11, will report progressively from July 2008 to the end of 2009.
Councillor Bell welcomed the Federal Government’s preparedness to tackle intergovernmental financial relations as part of its Tax Review.
“The decision of the Federal Government to look at the full tax system – Commonwealth, State and Local – underlines what ALGA has been saying for some time, you cannot treat each sphere in isolation,” Councillor Bell said.
“The recent study by the Productivity Commission into Local Government’s capacity to raise Own Source Revenue ignored the fact that Local Government taxes and charges are part of a whole of government approach to raising revenue and providing services.
“While Local Government has been doing its bit to raise revenue, the real problem has been the tax sharing arrangements between Local Government, which is called on by communities to provide an enormous range of services, and the Federal Government which raises vastly more revenue than it spends.
“The Government has announced that it will provide
$1.86 billion in FAGs to Local Government in 2008–09. This funding is welcome and makes a vital contribution to assisting councils to deliver the services and infrastructure required by local communities.
“Unfortunately however, all councils face significant and increasing costs pressures in this time of economic growth and the relatively low rate of increase in the grants will mean that the many councils will slip further behind.
“It is for this reason that ALGA has called for more equitable tax sharing by reforming the FAGs so that they are maintained at a constant rate of one per cent of Commonwealth tax revenue.”
Natural Disaster Mitigation Program
Councillor Paul Bell has welcomed the Federal Government’s decision to extend the funding for the Natural Disaster Mitigation Program (NDMP) beyond 30 June 2008 but is baffled by the decision to extend the program for only a single year.
“The mitigation projects funded are often implemented over a number of years and to extend funding by just a single year, while welcome, will create uncertainty in councils about future mitigation works,” Councillor Bell said.
“ALGA will seek the reasons behind the Government’s decision and details of any future plans it may have for the Natural Disaster Mitigation Program over the coming weeks.”
Further initiatives in the Budget
- $2.25 billion over five years for Caring for Our Country
- $12.6 million over four years from 2007–08 to assist
29 regional airports with baggage security screening (the
Regional Airport Funding program will provide $29.5
million for regional airports to implement basic security
measures) - $270.7 million for the Australian Broadband Guarantee
- transitional income support from 16 June 2008 to 30
June 2009 of $14.5 million to farm families in financial
difficulty - Housing Affordability Fund with $30 million for
Electronic Development Assessment (eDA) - $39 million over five years to bring nurses back into the
workforce.
