Australia Democracy, devolution and governance, Finance

Local government sustainability – a new Commonwealth inquiry

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On 21 March 2024, the Commonwealth House of Representatives Standing Committee on Regional Development, Infrastructure and Transport launched an inquiry into the financial sustainability of local government. This represents an important opportunity to address longstanding concerns about the funding of the local government sector, including funding shortfalls, insecurity of funding streams, and governance arrangements. The committee is accepting submissions until 3 May 2024.

The terms of reference nominate the following areas of particular focus:

  • The financial sustainability and funding of local government
  • The changing infrastructure and service delivery obligations of local government
  • Any structural impediments to security for local government workers and infrastructure and service delivery
  • Trends in the attraction and retention of a skilled workforce in the local government sector, including impacts of labour hire practices
  • The role of the Australian Government in addressing issues raised in relation to the above, and
  • Other relevant issues.

Announcing the inquiry, the Chair of the Committee, Luke Gosling MP, emphasised impacts in regional areas, noting that the committee “is seeking to understand the challenges faced by local governments in servicing infrastructure requirements across Australia’s regional, rural, and remote locations.”

Comment

The inquiry provides an opportunity to address longstanding challenges for local government in Australia. The lack of formal constitutional recognition for this level of government means that it is dependent on funding streams under the control of Commonwealth and state governments. At the same time, as has been highlighted in previous briefings, there remains an expectation from the community that local councils deliver a wide range of services.

This financial security, or insecurity for many local councils, has a range of flow-on consequences. These include the ongoing challenges presented by rate capping in NSW and Victoria (subject of LGIU briefings here and here); and cost-shifting (discussed here), which leaves councils faced with an unenviable choice between absorbing funding shortfalls from other levels of government, or leaving key services inadequately funded.

Councils are also heavily dependent on grants from the Commonwealth in the form of financial assistance grants or FAGs as the grants are more commonly called, yet it is more than a decade since the last review of the distribution of these grants. A funding model that is heavily grants-based is vulnerable to a decline in allocations over time, and is inherently less certain than fixed funding streams. Grants-based funding models that are not subject to stringent governance are also vulnerable to accusations of pork-barreling.

The review of local government financial viability therefore represents an important opportunity to address these longstanding challenges.

Make a submission

Submissions can be uploaded to the inquiry webpage and must be made by 3 May 2024.

If you  have not made a submission to a federal Parliamentary inquiry before, help in preparing a submission to a Parliamentary Inquiry can be found here: https://www.aph.gov.au/Parliamentary_Business/Committees/House/Making_a_submission

For more information on this briefing, contact LGIU Australia by emailing [email protected]



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