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), the peak body representing councils.
In a statement, LGNSW said it had long been calling for the review, ‘in particular since IPART capped rate rises at 0.7 per cent 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 per cent 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 per cent and 2.5 per cent’.
Closely examine how rate peg is calculated
LGNSW President, Darriea Turley, said, ‘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’.
‘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.
‘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’.
Turley added, ‘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’.