The Victorian Government has announced annual rate rises for the State’s local councils will be capped at 2.5 percent.
Local Government Minister Natalie Hutchins said the decision honours an Andrews Government election promise and is made with ratepayers’ best interests in mind.
“We committed to capping council rates to inflation and putting an end to uncontrolled rate rises. We’re delivering on that promise,” Ms Hutchins said.
The Municipal Association of Victoria (MAV) President, Councillor Bill McArthur, said although this may seem like a short term win for ratepayers, evidence of previous rate capping models across Australia indicate it would not prove beneficial over time.
Following a three-year Northern Territory rate cap from 2008, a review by the NT Government found that it made councils overly reliant on grant funding. In NSW where rate pegging was introduced in 1977, the NSW Treasury Corporation found that councils faced an infrastructure funding shortfall of $7.2 billion in 2012.
Cr McArthur said the cap would mean the Victorian Government would need to start investing far more in infrastructure, particularly in rural areas.
“The councils hardest hit by the cap will be those who can least afford it. Rural shires have small budgets and populations, extensive road networks to maintain and a comprehensive range of community services.
“It is critical that these services continue to be provided equally to all Victorians, regardless of where they live. Under the rate cap model, the State will need to invest far more into rural areas to make up the shortfall.
“Strong evidence from numerous independent and government studies about rate capping imposed in other jurisdictions confirms caps lead to a reduction in spending on community infrastructure,” Cr McArthur said.
Any council wishing to apply for a higher cap has until 31 March to apply to the Essential Services Commission and will be expected to demonstrate extensive consultation with their local communities.
Cr McArthur said the MAV suggests councils now begin the community consultation process to communicate the potential consequences of the cap.
“Community views will now be integral to local decision-making about the budget tightening measures adopted to achieve the 2.5 per cent rate cap, and we urge all councils to start these difficult community discussions.”
