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Dear Editor,
Rate cap will leave a sting in the tail.
Last month Victoria’s 79 councils were informed that the State Government’s ‘Fair Go Rates Cap’ would be set at the Consumer Price Index (CPI) of 2.5 per cent.
Council rates linked to CPI may seem like a win for ratepayers, but could deliver a sting in the tail when the impacts are felt down the track.
A rate cap linked to consumer price movements, rather than council cost drivers, will mean councils need to look at a range of options. This includes deferring planned infrastructure, reducing capital works and the mix of current services, and higher debt levels. These options could also push greater costs onto future ratepayers.
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.
Victoria’s Kennett-era rate cap led to cuts in infrastructure spending, and a 2012 Auditor General’s report confirmed Victorian councils’ $225 million asset renewal gap is projected to grow to $2.6 billion by 2026.
It is disappointing the Victorian Government has ignored Essential Services Commission advice to establish a rate cap based on 60 per cent CPI and 40 per cent Wage Price Index, opting for a straight CPI cap instead.
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. We will be collating and reporting on impacts of the rate cap on council budgets so that communities can better understand the consequences of this State-sanctioned model.
Yours sincerely,
Bill McArthur
President
Municipal Association of Victoria (MAV)
