New research into local government financial sustainability in Australia has found that councils make sound funding decisions on behalf of their communities but are significantly underfunded across the country. 

Marcus Spiller, Partner and Executive Director at SGS Economics and Planning, launched the new research at the ALGA National General Assembly on 3 July. It analyses long-term trends in financial sustainability of Australia’s 537 councils and was prepared to support ALGA’s submission to the inquiry into local government sustainability. 

Some of the key findings include: 

  • Local governments could boost Australia’s Gross Domestic Product (GDP) by up to $7 billion per year if councils were sustainably funded by the Federal Government 
  • A $1 billion dollar investment in local government road maintenance will deliver a $3.5 billion increase in real GDP 
  • $250 million invested in better supply and curation of parks and gardens will result in a $900 million GDP boost 
  • Efficient design of regulatory processes within councils can yield an annual benefit of $1.6 million 
  • Increased block transfers of funds from Commonwealth and states to local government can save $235.64 million in administrative costs and increase GDP by $300 million each year 
  • Increased retention of local government workers can save up to $424.5 million in administration costs and boost GDP by $600 million each year 

“Putting local government on a sustainable financial footing would largely pay for itself,” said Mr Spiller when he presented the research. 

“One of our key findings was that councils are good with money. Compound annual growth in local government expenditure between 2013-14 and 2022-23 lagged inflation, representing a cut in real terms. 

“Despite this, councils maintained a high satisfaction level within their constituencies, which indicates a greater efficiency compared to other tiers of government.” 

Unfortunately, many councils are struggling financially. More than 50 per cent of councils are not raising enough revenue from their own sources to meet costs, and almost half of all councils cannot renew their assets. As a result, access to basic local government services is at risk in many communities. 

According to Mr Spiller, an approach that would provide sound local government financing would see councils having fiscal autonomy, with access to an independent tax base commensurate with their service responsibilities.  

Where councils face tax base limits or costs beyond their control, they should be assisted to provide a basic level of service to their communities; and Federal and State governments should not interfere with the allocation of this assistance, unless in matters of genuine national or state significance. 

To read the full report, click here. 

Featured image: SGS Economics and Planning Partner and Executive Director, Marcus Spiller, presenting at ALGA. Image credit: Prime Creative Media. 

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