by Carol Mills, Director, Institute of Public Policy And Governance, University of Technology Sydney

Over the last 18 months, the importance of community has come into increasingly sharp focus, with significant changes to the way we work and the way we live our lives occurring at speed. In the wake of bushfires, floods, a pressing climate crisis and the COVID-19 pandemic, local governments have been playing a vital role by supporting, providing services to and advocating for communities under stress.

The immediacy of the issues generated by the COVID crisis in 2020 saw councils across Australia – from capital cities to the smallest regional communities – respond in rapid and innovative ways to the urgent needs of their communities and their staff.

From home delivered library services, to small business grants, rent relief, online cooking lessons and much, much more, councils nationally stepped up to meet unprecedented challenges. While some of the responses were time limited, they added pressure to an already changing and, in many locations, stressed sector.

Trends in relation to population change, budget constraints, economic transitions and rising demands and expectations from business and communities were already in train. However, COVID and natural disasters have accelerated them and will continue to influence the future of local government in at least the medium term.

For instance, cities were already grappling with how best to plan for emerging transport, digital and open space needs. Working from home and successive lockdowns have meant people have sought local recreation opportunities,  outdoor-dining and online services at unanticipated levels.

Many regional and rural councils have been looking to find new ways to attract and retain skilled workers for some time. Now they are witnessing accelerated people migration and demand for community and health services.

The tyranny of distance has long confronted geographically large areas with very low population density – now isolation is seen as both a blessing and a curse. And all councils are needing to manage ageing infrastructure. Of course, local government is not grappling with these issues in isolation.

Meeting rising community expectations, responding to demographic change, environmental challenges and housing affordability issues, for example, are not exclusively the domain of local government. However, strong, sustainable local government is vital to delivering meaningful solutions.

Local government can only best respond to these immediate and long-term trends when the federal system is working effectively. This means a mix of incremental and rapid change to the way councils are resourced and governed.

The sector met the challenges of 2020 and 2021 by demonstrating the value of local solutions for local communities, but all layers of government and the sector need to work together to ensure this is sustained. The challenges and opportunities presented by federalism in Australia are significant for local governments.

The exclusion of local government representation from the National Cabinet at the outset of COVID-19 has altered the balance in the intergovernmental dynamic.

While the National Cabinet was originally announced as an interim measure, the longer it operates in its present form, the harder it is for the voice of local government to be heard. This matters because the inter-governmental issues facing local government should not be underestimated.

The reduction in Financial Assistance Grants as a proportion of Commonwealth tax revenue; the impact of rate capping and pegging on revenue; a growth in cost shifting from Commonwealth and States; and the misalignment between the purpose and eligibility criteria for Government grants and local needs and priorities – all present significant contextual and operating constraints for councils.

Not surprisingly, as a result, financial sustainability has grown as a critical issue for many councils. With councils collecting three per cent of national tax revenue and yet providing 23 per cent of services, the challenge has never been starker. While on average, councils earn around 40 per cent of their revenue from property rates, in some councils this drops to as low as 15 per cent.

Even amongst more financially secure councils the drop in revenue in 2020-21 from service shutdowns, business concessions, and the like have caused them to draw on reserves. Outside the context of the 2020-21 emergencies, communities across the country will continue to rely on councils for essential services.

Communities will continue to rely on councils for a growing list of essential services, including waste management and road construction.

That list of services is both growing and undergoing change – waste management and community services being two prime examples. Local government has also sought to step up in major emerging policy areas, playing a key role in liveable communities, the circular economy, roads and transport infrastructure, smart cities, natural disaster and pandemic recovery.

However, each of these issues requires a sustained, coordinated approach. To avoid a future where the gap in services is driven by the local revenue raising capacity of a council, funding model reform is required.

Many state governments have turned to amalgamations as a financial solution, anticipating economies of scale will result in financial sustainability. However, the evidence demonstrates this is not necessarily the case, and other options are crucial. That dialogue should start at the national level.

There is no question that local government needs to be represented at the highest decision-making levels, and its participation in COAG was both symbolically and practically important. A new model is needed as a matter of priority.

In this context, there is much to build on. Despite the fragmented policy landscape and against a backdrop of change and challenge, more councils than ever that we work with are demonstrating leadership and focusing on sustainability across a range of fronts, including by:

  • Engaging their communities through inclusionary planning and decision-making
  • Utilising technology in planning, customer service and administration
  • Ensuring both long and short term planning underpins resource allocation
  • Investing in the circular economy
  • Diversifying income sources
  • Continuously driving efficiencies

If 2020 and 2021 have shown us anything, it’s that councils have been able to step forward and quickly and effectively display leadership when required. They have shown that they are at the forefront as respondents to any crisis in Australia.

They have demonstrated their agility and excelled at frontline service delivery. They have provided financial support for local businesses, offered direct services to vulnerable community members and flexibly supported and redeployed staff.

Their distinct advantage of local knowledge and connections has enabled them to adroitly manage innovative service delivery and support community wellbeing. These changes have increased the visibility of local government services and driven councils to communicate more effectively.

Importantly it has put a spotlight on their role in holding together communities and creating social cohesion. To continue this effort, councils need to work with their communities, each other and the other layers of government to ensure they retain and further build their capacity to deliver positive economic, social and environmental outcomes.

Professor Carol Mills is the Director of the UTS Institute for Public Policy and Governance (IPPG). IPPG is a leading team of experienced chief and senior executive level public sector practitioners and academics committed to working with organisations and communities to build capability and create public good. IPPG’s Centre for Local Government has been Australia’s leading expert on local government for 30 years.

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