Disappointing rate cap, system needs review

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The difficult discussions councils across the state have been having with their communities are set to continue into the next financial year after the State Government’s rate cap announcement.

The rate cap will be set at 2.75 percent for 2024/25.

With this decrease – down from 3.5 percent in 23/24 – councils will have no relief from the extreme financial pressures they have faced in the last four years.

The decision is only further evidence of the requirement for a review of the way the cap is set, something the Municipal Association of Victoria (MAV) has long been calling for.

MAV President Cr David Clark said councils were feeling the financial strain of rapid inflation, staff shortages, and cost shifting.

“Councils are dealing with spiralling costs on multiple fronts. To decrease the rate cap at this time means many councils will be struggling to deliver the services and infrastructure our communities rightly demand,” Cr Clark said.

“While local government goes backwards by 30 percent compared to CPI since the introduction of the rate cap, all while the State and Federal budgets increase far beyond this. For councils to be stuck at 2.75 percent is going to be challenging in the extreme.”

Cr Clark reiterated the MAV’s position that the capping system itself required an independent review.

“The rate cap is a blunt instrument that provides no capacity to deal with the diverse needs of individual communities and the councils who service them,” Cr Clark explained.

“It does not take into account the vastly different needs of councils across the state. Some councils are still facing exhaustive repair bills from natural disasters, others are in desperate need of upgraded or new infrastructure. It defies logic to use a catch all cap for setting rates given the broad variety of challengers.”

A more flexible approach to a rate cap, recognising unique infrastructure challenges, cost shifting by the State Government, and the true cost of council services would provide a more effective way forward for the sector than the current mechanism,” Cr Clark said.