The announcement by the Independent Pricing and Regulatory Tribunal (IPART) that it will undertake a long-awaited review of the local government rate peg has been welcomed by Local Government NSW.
LGNSW has long been calling for the review, in particular since IPART capped rate rises at 0.7% for 2022/23 – the lowest baseline rate cap in more than two decades – in the face of rising inflation that is now tipped to reach 7.75% by the end of the year.
IPART later acknowledged the dire financial situation its initial decision would have on councils and subsequently allowed 86 NSW councils to increase their rates by up to 1.6% and 2.5%.
LGNSW President Darriea Turley said the review of the rate peg was a win for the local government sector.
“This review will provide the opportunity to closely examine how the rate peg is calculated and what improvements could be made to prevent future financial shocks to the local government sector,” Cr Turley said.
“IPART’s decision to introduce a record low rate cap just before inflation began to spiral out of control is clear evidence that the methodology used to calculate the rate cap is completely broken.
“This welcome review will hopefully ensure such mistakes will not happen again by replacing a defective methodology that is not fit for purpose.
“Councils are determined to keep rates as low as possible, but we are also required to deliver services and infrastructure that our communities expect and deserve. We simply cannot do this with a system that appears to be incapable of pre-empting or reacting to a rapidly changing economic landscape.
“I would like to thank the Minister for Local Government, the Hon. Wendy Tuckerman MP, for listening to our concerns about the current rate peg system and agreeing to our calls for a review.”
Under the terms of reference, the review will investigate how the rate peg methodology can better reflect inflation and costs of providing local government goods and services.
The review will also look at options for better capturing changes in council cost movements on a more timely basis.
Crucially, the terms of reference also explicitly include an investigation into the rate peg’s population growth factor, which aligns with a resolution from this year’s LGNSW Special Conference calling for a review of the inadequacy of IPART’s rate formula for growing councils.
IPART will publish an issues paper and call for submissions as part of the review in September, with a draft report due to be released in February.
