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End the freeze - restore indexation

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The Municipal Association of Victoria (MAV) and councils across Australia are calling on the Commonwealth Government to honour its promise and restore indexation of Financial Assistance Grants in the May Federal Budget.

MAV President, Cr Mary Lalios said the Prime Minister must end the freeze to ensure that federal grants to local government grow in line with population and the Consumer Price Index (CPI).

“Victorian local government has missed out on $200 million in untied Federal funding support for local roads and community services since the indexation freeze commenced in 2014.

“Financial Assistance Grants are a vital source of funding for councils, helping to deliver more than 100 local services and maintain $80 billion worth of community infrastructure.

“This loss of funding has been a significant hit on council budgets, particularly in rural areas where communities can least afford it. Councils with small populations and large geographic areas are far more vulnerable to any loss of revenue as they have limited alternative funding sources.

“Rural people have a right to expect reasonable levels of service regardless of where they live, however some rural shires were already struggling to deliver a minimum level of services to their communities before the Federal indexation freeze,” she said.

The Australian Government provides Financial Assistance Grants to councils nationally to assist with the costs of providing essential local services to communities. The grants redistribute taxation revenue back to local communities as the Commonwealth collects 79.9 per cent of all taxes, while local government collects around 3.6 per cent of taxes through property rates.

Grants are indexed by a combination of CPI and the rate of population growth. The former Treasurer placed a three-year freeze on the indexation component in the 2014 Federal Budget.

Cr Lalios said local government had welcomed a promise by Federal Minister for Local Government and Territories, Senator Fiona Nash, late last year that indexation would be restored from 1 July 2017.

“We are now calling on the Australian Government to honour its commitment and help ensure communities are provided with the local services they need and value.

“Our top priority is to have the indexation restored, however the sector is also seeking a more sustainable pool of funding and a methodology that better reflects cost pressures facing councils.

“Government grants are usually indexed to CPI or less, meaning that grants are lower than actual cost movements to deliver the services, leaving councils to fund the gap from rates revenue.

“The quantum of Financial Assistance Grants has also been reducing as a proportion of total Commonwealth revenue, declining from 1.2 per cent in 1993-94 to 0.6 per cent in 2015-16. Meanwhile GST revenue has increased and council responsibilities continue to expand.

“We need to secure a more sustainable funding model for our communities,” she said.

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Contact Cr Mary Lalios, MAV President on 0447 189 409 or MAV Communications on 9667 5521.