New cap of 2.75 per cent sparks debate over budget pressures
Under the state government’s new cap, council rates will rise by no more than 2.75 per cent next financial year, and the screws on council budgets will be tightened further as costs rise.
Local Government Minister Nick Staikos’ decision to limit the increase to this figure was published in the official gazette on MondayIt was based on the estimated consumer price index and implemented as a measure to ease cost-of-living pressures.
But the Municipal Association of Victoria (MAV) criticized the reduction from the 3 per cent cap this financial year, arguing it still did not accurately reflect rising council costs.
Victoria’s councils’ peak body wants the Allan government to adopt a dedicated local government cost index because Victoria is the only state without one.
“Using Treasury’s forecasts to inform the interest rate cap on CPI growth simply doesn’t work,” said MAV president Jennifer Anderson.
“This is not a true reflection of the increasing costs our industry faces in construction, materials and services.”
Inflation also greatly exceeded forecasts in the wake of the pandemic; This means rates, the main source of municipal revenue, have not kept pace with broader price increases.
MAV warned that municipal infrastructure such as roads would deteriorate and basic services such as kindergartens would be closed unless the fee cap was adjusted.
The unexpected inflation increase in November also caused the CPI forecasts for the coming year to be questioned.
But the new cap interest rate eases cost-of-living pressure on families and still allows municipalities to provide adequate services, the provincial government said in a press release on Tuesday.
“The rate cap has made a real difference to household budgets,” Staikos said.
Municipalities also received revised guidelines for waste management fees, clarifying that rates should not exceed the costs incurred by the municipality for kerbside services.
Staikos said this would make council waste charges more accurate and consistent across Victoria.
Victoria Taxpayers and Residents Association secretary Tanya Tescher was concerned councils would likely raise rates to the maximum allowed below the 2.75 per cent cap.
Wage caps in Victoria since their introduction in 2016
- 2016-2017: 2.5 percent
- 2017-2018: 2 percent
- 2018-2019: 2.25 percent
- 2019-2020: 2.5 percent
- 2020-2021: 2 percent
- 2021-2022: 1.5 percent
- 2022-2023: 1.75 percent
- 2023-2024: 3.5 percent
- 2024-2025: 2.75 percent
- 2025-2026: 3 percent
- 2025-2026: 2.75 percent – (announced on December 23, 2025)
He feared many would then earn extra income through other high fees such as parking fees.
“We always want to see low increases in interest rates, especially in this period when people are struggling with the cost of living,” he said.
“But we also understand that councils must deliver services to their taxpayers. It is particularly important that councils do not waste money on extravagant items, as we have seen done in some council areas.”
Tescher pointed to Bayside Council as evidence that this is possible. freeze rates.
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