Cost concern as rate cap set

Council rate increases will be capped at the forecast Consumer Price Index, CPI, for next financial year.

Local Government Minister Melissa Horne confirmed a rate cap of 2.75 percent for 2024-25 — down from 3.5 percent the previous year — under the government’s Fair Go Rates system.

The government accepted the recommendation of the Essential Services Commission regarding the cap, which is equal to the forecast Consumer Price Index.

However, the Municipal Association of Victoria, MAV, has called for a review of the system it says would continue the need for councils to make ‘difficult decisions’ amid ‘extreme financial pressures’.

The rate cap limits the amount all Victorian councils can increase their total revenue from general rates and municipal charges.

Ms Horne also released guidelines for service rates and charges for collection of kerbside waste and recycling from properties — which are not subject to the rate cap.

“Fair Go Rates mean households have certainty over their council rates,” Ms Horne said.

“The rates cap has made a real difference to household budgets over the past eight years and we’ll keep working to reduce costs for families.”

MAV president David Clark said councils were feeling the financial strain of rapid inflation, staff shortages and cost shifting. “Councils are dealing with spiralling costs on multiple fronts. To decrease the rate cap at this time means many councils will be struggling to deliver the services and infrastructure our communities rightly demand,” he said.

“While local government goes backwards by 30 percent compared to CPI since the introduction of the rate cap, both state and federal budgets increase far beyond this.”

Cr Clark said the MAV continued to call for an independent review of the rate capping system.

“The rate cap does not take into account the vastly different needs of councils across the state. Some councils are still facing exhaustive repair bills from natural disasters; others are in desperate need of upgraded or new infrastructure,” he said.

“A more flexible approach to a rate cap, recognising unique infrastructure challenges, cost shifting by the State Government, and the true cost of council services would provide a more effective way forward for the sector than the current mechanism.”

The government introduced the Fair Go Rates system in 2016. In the decade prior, council rates increased by an average of six percent a year.

Councils can apply for a higher rate cap if they can demonstrate community support and a need for spending on services or projects that requires a rate rise above the capped amount.