A federal inquiry has uncovered significant financial pressures facing local councils, making it increasingly difficult for them to meet the diverse expectations of their communities. The House of Representatives Standing Committee on Regional Development, Infrastructure, and Transport’s interim report, released on Friday, highlights the growing financial strain as local governments are tasked with an expanding array of responsibilities.
The inquiry reveals that local councils, once primarily focused on managing rates, roads, and rubbish, are now being called upon to address complex issues such as healthcare, housing, climate change adaptation, and aging infrastructure. As the role of local government evolves, councils are expected to provide services traditionally managed by higher levels of government, all while navigating a challenging financial landscape.
Luke Gosling, chair of the committee, emphasized that these additional responsibilities are placing a severe burden on councils, particularly those with limited financial resources. “Local governments around Australia are increasingly being asked to take on roles that have previously been under the purview of the state and federal governments,” said Gosling. “These growing demands are outpacing their ability to fund services, leaving many councils struggling to keep up with community expectations.”
The report draws attention to the issue of “cost shifting,” where responsibilities are transferred from higher levels of government to local councils without adequate funding support. This practice has contributed to a growing financial crisis for local governments, forcing them to rely heavily on state and federal grants.
Matt Burnett, president of the Local Government Association of Queensland, expressed his concern that the report’s findings were nothing new to local councils. “We’ve been saying for years that local governments need increased financial assistance. The report makes it clear that more revenue, particularly through financial assistance grants, is necessary for councils to continue providing essential services,” he said.
Burnett, who also serves as Mayor of Gladstone, met with parliamentarians in Canberra to stress the need for greater federal support. “Councils need additional funding for community infrastructure and other critical services,” he added. “We need both the federal government and the opposition to recognize this and commit to more substantial financial backing.”
The inquiry, which began in March 2024, gathered over 280 submissions and held 16 public hearings in regional areas across Australia. The committee heard from a wide range of stakeholders, including local governments, state and federal agencies, academics, and unions. The focus was on understanding the financial pressures councils face as they take on an increasing range of responsibilities.
Several key recommendations emerged from the inquiry, including a review of the financial assistance grants program to ensure a fair distribution of funds across all councils. Other recommendations include exploring new tripartite agreements between federal, state, and local governments to end cost-shifting, as well as considering the eligibility of councils for fringe benefit tax exemptions.
The inquiry also received submissions from councils across Australia, many of which highlighted the disproportionate financial burden placed on rural and remote areas. For example, the Murrumbidgee Council in New South Wales noted that rural councils often struggle with small rate bases, which make it difficult to meet the growing demand for services. “We often find ourselves delivering services outside of our core responsibilities simply because there are no alternatives,” the council’s submission stated.
Similarly, the District Council of Tumby Bay in South Australia highlighted the financial challenges faced by regional coastal towns in implementing climate change adaptation measures. “The cost of these strategies is often beyond our financial capacity, leaving us reliant on grants and limited ratepayer funding,” the council said.
The Shire of Gnowangerup in Western Australia also shared concerns about rising costs and difficulties attracting workers, which have further strained its financial resources. “With a limited rates base and the unique challenges of rural areas, we are heavily reliant on state and federal grants to maintain essential services,” the Shire’s submission noted.
While the committee is still reviewing submissions and considering the best course of action, Gosling assured that all recommendations would be thoroughly evaluated before the final findings are released.
“The committee is carefully reviewing the evidence we’ve received and considering the wide range of recommendations put forward to improve the sustainability of local governments across the country,” he said.
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