Australian Politics and Policy - Senior, 2019a

Local government
services (17.2 per cent) are the main expenditure items, although the amount local
councils spend on each function varies depending on the different responsibilities
of councils in each state and territory.
Because property rates are their main revenue source and state governments
use different methods to calculate the land values on which property rates are
based, local government revenues vary substantially across Australia. For example,
South Australian local governments collect 60 per cent of their revenue from rates,
compared with around 15 per cent for the Northern Territory. 23 Other major
revenue sources include fees and charges (such as parking fines and fees for lodging
development applications), rental income from properties and grants from other
levels of government.
Capital city councils that include central business districts also often have
higher land values, which means they collect more from rates than other councils
and can deliver more advanced services. 24 For example, Brisbane City Council
operates one of Australia’s largest bus fleets, whereas state governments operate
buses in other jurisdictions. 25 While own-source revenue (such as rates) comprises
up to 85 per cent of a local government’s revenue, 26 this is less in rural areas where
rateable land values are often lower.
Local governments also receive annual and one-off grants from higher levels
of government. These grants typically make up a larger share of revenue for rural
local governments. 27 A range of criteria are used to determine the grant amounts,
and the formula is often the subject of conflict. Annual grants are classed as general
purpose and can be used for whatever activities a council desires, while one-off
grants are typically for specific purposes and can only be spent on activities defined
by national or state and territory governments.
In recent decades, the amount of revenue Australia’s local governments can
raise from property rates has been capped by some state governments. This
increasingly common practice has been a subject of conflict between local and state
governments, and some local governments have been granted special exemptions. 28
Reform
Reforms to Australia’s local government systems in recent decades have focused
largely on structural and governance issues, such as altering administrative boundaries,
amending codes of conduct and land use planning decision making. 29 For
example, in the 1990s, the Victorian government dismissed all local governments
23 Independent Pricing and Regulatory Tribunal 2009.
24 Spearritt 2000.
25 Brisbane City Council 2019.
26 Productivity Commission 2017.
27 Worthington and Dollery 2000.
28 Worthington and Dollery 2000.
29 Dollery, Goode and Grant 2010; Nicholls 2017.
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