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Gearing up for growth: report on local and state financial relations
For decades, Vertical Fiscal Imbalance (VFI) has been a hotly debated topic within the Australian Federation. VFI occurs when the income for each level of government does not match the expenditure on their respective responsibilities. Essentially, one level of government collects more money than it needs, while another level doesn’t collect enough to cover its expenses. Typically, discussions on VFI centre on State and Federal financial relations, often overlooking the crucial role of Local Government, which provides essential municipal services shaping our cities' operations.
This report reviews the current financial landscape in Victoria, particularly focusing on State and local financial relations over the past decade, a period marked by unprecedented events such as the COVID-19 pandemic and increased climatic events. A major part of our analysis centres on capital expenditure and its role in both servicing and growing our cities.
As Melbourne’s population is projected to outgrow Sydney due to factors beyond local government control, the need for substantial investment in new suburbs and infrastructure, especially within the geographical boundaries of the Outer Melbourne Councils, becomes paramount.
Strategic recommendations include:
- Rate indexation reform
- Optimising existing property portfolio
- Windfall gains tax reform
- Formalise strategic partnerships for large scale capital projects.
- Other Operating Efficiencies
Several operational efficiencies can be achieved through restructuring initiatives, such as:
• Shared Services: Enhancing service delivery through shared services among councils.
• Co-location of Facilities: Implementing co-location of facilities, exemplified by government hubs, to maximise resource utilisation.
• Joint Procurement Reform: Adopting joint procurement practices, as seen with the ACT Government leveraging federal government contracts, to achieve cost savings.
• Infrastructure Victoria Pipeline: Utilising the Infrastructure Victoria pipeline to streamline and prioritise infrastructure projects.
