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Local government finance

Rates, fees, fines and charges are collected locally to assist councils to deliver services and infrastructure to communities.

Local government spends over $7.6 billion per year in providing infrastructure and services such as roads, bridges, sporting facilities and buildings, aged care, maternal and child health, and childcare.

Since insufficient revenue is collected locally to deliver core services, councils also rely on specific purpose and general purpose grants to make up local funding shortfalls.

Local government depends substantially on the Australian and Victorian governments to meet its funding needs.

The reliance on other levels of government for funding support causes major financial pressures for councils including:

  • cost shifting, where responsibilities are passed on to local government without adequate funding
  • grants failing to keep pace with underlying costs increases in delivering these services. The Local government cost index shows that council costs generally increase at a rate of about one per cent more than inflation, yet grants are often indexed to inflation
  • direct declines in funding
  • levies collected by councils on behalf of the state, such as fire services and landfill levies
  • state and federal regulations, and reporting obligations
  • superannuation shortfalls

Another financial pressure for councils is to meet their obligations to maintain and renew ageing community infrastructure such as roads, bridges, public libraries, sporting grounds and kindergartens. 

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