Australia's National Local Government Newspaper Online

Local Government will struggle financially with our ageing population

The Productivity Commission has warned that Local Governments will struggle under current funding arrangements to properly provide as Australia’s population ages. Responding to the release of the Commission’s draft research report, then Australian Local Government Association (ALGA) President, Councillor Rae Perry, said Local Government faced serious budgetary pressures.

“An ageing population and demographic change will have different impacts in different areas,” she said. “But much of Local Government will face serious budgetary pressure as it struggles to keep pace with increasing demand for human services while attempting to maintain and develop traditional services, such as road and infrastructure maintenance. In fact, 49 per cent of Local Government spending is on providing human services, such as welfare, housing, health, community amenities, recreation and culture.

The Productivity Commission report found:

• The ageing of the population will place increasing pressure on Local Government spending.
• There is likely to be an emerging fiscal deficit at the Local Government level under current policy settings.
• The number of pensioners and pensioner rate concessions is projected to increase significantly resulting in a lower rate base, this is Local Government’s only source of taxation revenue.
• Local Government revenue is unlikely to increase at a greater rate than the growth in GDP and some component, such as Federal Financial Assistance Grants to Local Government, will grow at slower rates.

“The report strongly backs ALGA’s case for reform of Commonwealth Local Government financial relations,” Rae Perry said. “We need to move away from the current system of Financial Assistance Grants to one which provides Local Government with a fair share of national taxation revenue.”

ALGA is working with the Australian Government to help prepare communities for an ageing population. As a full member of the Council of Australian Governments, it is looking forward to discussing this report in detail with the Prime Minister, Premiers and Chief Ministers.

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