Posted 2/6/08
Municipal Association of Victoria (MAV)
Local government costs rise faster than CPI
28 May 2008
The Municipal Association of Victoria (MAV) today released figures forecasting local government costs are expected to increase by an average 4.4 per cent in 2008-09.
Cr Dick Gross, MAV President said it was well known that all prices rise, but many municipalities could not realistically limit rate increases to CPI as local government expenses were different to household expenses.
“Local government cost increases have slowed from 5 per cent in 2007-08, but the Cost Index calculated by the MAV shows they still rise faster than CPI. Councils will have to meet higher expenses just to stand still.
“The rising cost of delivering a ‘basket’ of council services is not reflected in the Consumer Price Index due to the majority of council spending being driven by labour costs, and to a lesser extent construction costs.
“To provide the same level of programs and services to communities as last year will cost an extra 4.4 per cent in the year ahead. However, additional rate increases may also be needed in some municipalities to fund capital works programs and to overcome declining grants from other levels of government.
“Adding to councils’ cost pressures, the State and Commonwealth continue to link indexation of many grants to CPI or less, despite this being a largely irrelevant benchmarking tool for real cost movements.
“Indexation continues to be a point of frustration for local government as the sector has limited sources of revenue and relies on inter-governmental grants to deliver many programs.
“The MAV is hopeful that an upcoming national review of taxation will provide more appropriate growth in financial assistance from other levels of government to help ease the annual pressure on councils to go cap in hand to ratepayers,” he said.
The Consumer Price Index calculates price movements for a ‘basket’ of common household goods and services such as food, petrol and utility costs. The MAV Local Government Cost Index is calculated annually using a combination of construction, materials and wages indices to measure the sector’s expenditure profile.
Cr Gross said many of the services provided by councils were simply not possible without staff or contractors to deliver them.
“From maintenance of parks and gardens, staffing of libraries, food safety inspectors, provision of home care, meals and respite services, to childcare workers, planning staff, garbage collectors, school crossing supervisors and maternal and child health nurses. And the list goes on.
“The other major expense for councils is material and construction costs for roads, drains, footpaths and community infrastructure capital works programs.
“As well as rising local government costs, many councils need to direct additional revenue into infrastructure maintenance, renewal and upgrades to combat the annual $280 million under-spend.
“If more funding is not raised to invest in local government’s $43.5 billion worth of assets, the infrastructure is at risk of declining faster than it can be repaired, leaving a huge cost impost for future generations.
“Cost increases are an unwelcome reality in every aspect of our lives. Councils are no different and have a limited capacity to absorb increases without it affecting rates or the level of services provided,” he said.
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For further information contact MAV President Cr Dick Gross on 0411 446 167 or the MAV Communications Unit on (03) 9667 5521.
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Debbie Smith
Senior Communications Adviser
MAV
Level 12, 60 Collins St
Melbourne VIC 3000
GPO Box 4326
Ph: 9667 5521
Fx: 9667 5550
Mb: 0414 396 097
Email: dsmith@mav.asn.au
Web: www.mav.asn.au