Finance
Item 13: Rate Pegging Limit for 2017/18
The Independent Pricing and Regulatory Tribunal of NSW
announced this week that the rate pegging limit for the financial
year 2017/18 will be 1.5 per cent.
The rate pegging limit is determined by the Independent Pricing and
Regulatory Tribunal (IPART) using a local government cost index (LGCI)
and a discount productivity factor.
IPART calculated the rate peg for 2017/18 by:
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
Taking the increase in the local government cost index for the year
to September 2016 of 1.47 per cent
Deducting a productivity factor of 0.001 per cent.
IPART information
IPART’s media release and a fact
sheet are available on IPART’s
website
LGNSW information
LGNSW Media Release
LGNSW contact
Shaun McBride
[email protected]
Ref. R90/0397-05 SM
This resulted in a rate peg of 1.47 per cent, which was rounded up to 1.5 per cent.
The main contributors to LGCI over the year ending September 2016 were:
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

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An increase of 2.3 per cent in employee benefits and on-costs, measured by the Australian Bureau of
Statistics (ABS) wage price index for the NSW public sector
An increase of 1.9 per cent in other business services costs (e.g. materials and contracts such as other
operating leases, contractor and consultancy costs), measured by the ABS producer price index for other
administrative services
An increase of 2.7 per cent in buildings – non-dwelling costs, measured by the ABS producer price index
for non-residential building construction
An increase of 0.6 per cent in construction works – roads, drains, footpaths, kerbing and bridges costs,
measured by the ABS producer price index for roads and bridge construction NSW.
Partly offsetting these impacts were decreases in automotive fuels (10.5 per cent), gas (10.4 per cent), and
telecommunications and internet services (7.1 per cent).
The rate pegging limit of 1.5 per cent is down from 1.8 per cent for the financial year 2016/17. The increase is
slightly smaller than the consumer price index.
It needs to be noted that the LGCI only reflects movements in underlying costs. The index does not reflect
increased costs arising from the need to expand services to meet growing demands or the need to increase
infrastructure spending to address backlogs or growth. These needs are to be met by way of special rate
variations.
LGNSW comments
The rate pegging limit of 1.5 per cent is unrealistically low and does not reflect the real cost pressures facing
NSW councils. Without seeking and securing rate variations over the rate pegging limit, councils will need to cut
services and reduce expenditure on community infrastructure and facilities. The outcome further highlights the
failure of the rate pegging system - no general index can reflect the individual needs and circumstances of a
wide range of councils and communities.
On 29 November 2016, LGNSW issued a media release critical of the low rate pegging limit.
LGNSW continues to be firmly opposed to rate pegging and strongly supports the abolition of rate pegging
along with the introduction of a community-based strategic service and resource planning framework
(integrated planning and reporting reform). Communities should determine rate levels through the community
strategic planning and budgeting process.
LGNSW strongly encourages councils to make applications for rate variations to cover growth needs, address
backlogs, develop contribution shortfalls and make catch up adjustments. Councils should aim to notify IPART
of their intention to apply for a 2017-18 special rate variation or minimum rate increase application by 9
December 2016. Notification letters and applications should be lodged via IPART's council portal. On the basis
of current IPART advice, completed applications will not need to be submitted until February 2017.
Local Government NSW Weekly 48/16
2 December 2016
Page 17