Chapter 1 : Local governance in Australia

Constitutional responsibility for local government lies with the States and Territories, with each jurisdiction providing the legal and regulatory framework for council operations. Consequently there are often significant differences in the roles, functions and responsibilities of councils and the State systems responsible for overseeing councils and the services they deliver.

The Australian Government has recognised that the national interest is served through improving local governments' capacity to deliver services to all Australians, while also enhancing the performance and efficiency of the sector. The Australian Government uses the Local Government (Financial Assistance) Act 1995 as the primary mechanism to achieve these goals.

Local government roles

State legislation provides the framework for the roles of local government, and there are few limitations on what services local government can provide. In the last few decades the role of local government has expanded significantly, following the devolution of functions to local government from other levels of government. Broadly, local government has roles in governance, advocacy, service delivery, planning and community development, and regulation.

Local government functions

As services are devolved from other levels of government to the local government sector, the range of services and the role of local government continues to expand, taking in areas from economic and social development through to environmental management. Councils determine service provision according to local needs and the requirements of the various Local Government Acts and are increasingly providing services above and beyond those traditionally associated with local government. Examples of local government functions and services include:

  • engineering (public works design, construction and maintenance - for example, roads, bridges, footpaths, drainage, cleaning, waste collection and management)
  • recreation (golf courses, swimming pools, sports courts, recreation centres, halls, kiosks, camping grounds and caravan parks)
  • health (water sampling, food sampling, immunisation, toilets, noise control, meat inspection and animal control)
  • community services (child care, elderly care and accommodation, refuge facilities, meals on wheels, counselling and welfare)
  • building (inspection, licensing, certification and enforcement)
  • planning and development approval
  • administration (aerodromes, quarries, cemeteries, parking stations and street parking)
  • cultural/educational (libraries, art galleries and museums)
  • in some States, water and sewerage
  • other (abattoirs, sale-yards, markets and group purchasing schemes).

Unlike many other Organization for Economic Cooperation and Development (OECD) countries, including the United Kingdom and the United States of America, Australian local governments do not have responsibility for services such as health, education, policing and public housing, which remain largely the responsibilities of States and Territories or the Australian Government.

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Size and diversity

Local government has a small but significant role in the Australian economy, with local government expenditure around $16 billion in 2001-02, representing 2.1 per cent of gross domestic product.

In 2002-03, 722 local governing bodies were eligible for financial assistance grants and of these, 99 were Indigenous bodies. Local governing bodies include councils established under State legislation and declared bodies. Declared bodies are provided with financial assistance grants and are treated as councils for the purposes of grant allocations. However, declared bodies are not councils and do not carry the same legislative requirements as councils. Declared bodies include the Outback Areas Community Development Trust, the roads trust in the Northern Territory and certain Indigenous communities. It should be noted while considering the data provided that tables and figures are not exactly comparable due to the differences between local governing bodies and local councils.

Number of councils

Under the Australian Classification of Local Government (ACLG) system, 579 of the local governing bodies are categorised as 'regional' or 'rural' (see Appendix F for further information on the ACLG). Table 1.1 shows the different numbers of urban and rural and regional local governing bodies in each State and Territory. The number of local governing bodies in Australia is unchanged from last year.

Table 1.1 Distribution of urban, regional and rural local governing bodies (no. and %) by State, 2002-03

NSW
Vic
Qld
WA
SA
Tas
NT1
Total

Urban
44
33
14
29
19
2
2
143
%
25%
42%
9%
20%
26%
7%
3%
20%
Regional and Rural
131
46
143
113
55
27
64
579
%
75%
58%
91%
80%
74%
93%
97%
80%

Total
175
79
157
142
74
29
66
722

1 Includes Northern Territory Trust Account.
Source: Department of Transport and Regional Services.

Employees

In February 2003 approximately 154 000 people were employed by the local government sector (see Table 1.2). Following a significant decrease in the number of local government employees between February 1996 and February 2000 to an estimated 139 000 employees in February 2000, local government employment has almost returned to 1996 levels (see Figure 1.1).

It is difficult to attribute the increased local government sector employment rates to any one factor, however the Roads to Recovery program was introduced in 2000 and has perhaps been responsible for some of the growth. A review into the Roads to Recovery program, completed in February 2003 by the Department of Transport and Regional Services and the Australian Local Government Association, did find that, especially in rural and regional areas, the Roads to Recovery program generated employment and provided economic stimulation. The review found that rural councils on average directly employed an additional three to four employees as a result of the program.

Table 1.2 Local government employment, by State

State
Population1
Mar 2003 ('000)
Employees2 ('000)
Populations served per employee Feb 2003
Feb 1999
Feb 2001
Feb 2003

NSW
6 691.8
45.0
46.3
49.3
136
Vic
4 929.8
31.5
33.0
35.1
140
Qld
3 774.3
36.0
38.0
37.8
100
WA
1 951.3
13.5
13.5
15.8
97
SA
1 528.2
8.0
7.9
9.1
214
Tas
476.2
3.7
3.9
4.3
111
NT
197.1
2.5
2.5
2.9
68

Total
19 548.7
140.2
145.1
154.3
127

Sources: 1 ABS, Australian Demographic Statistics, cat. no. 3101.0, Sept 2003.
2 ABS, Employed Wage and Salary Earners, Australia: Trend Series, cat. no. 6248.0, March 2003.

Figure 1.1 Total local government employment, Feb.1996 to Feb.2003 national report

Population

Table 1.3 shows that across all States, the average population for local governing bodies in 2002-03 was almost 26 400. However, 50 per cent of local governing bodies have less than 6490 residents. Population ranges from zero for the Roads Trust in the Northern Territory to 899 604 for Brisbane City Council. Although the Road Trust is considered a local governing body for the purpose of grants, it has no physical area and no responsibility for providing services other than roads.

The average population size of local governing bodies by State differs markedly, varying from just over 3000 in the Northern Territory, where there are many small Indigenous communities, to slightly more than 61 000 in Victoria, which underwent significant State government-imposed structural reform in the mid-1990s.

Table 1.3 shows different characteristics of the distribution of local governing bodies by population within States and across all States. The median is 2727 in Western Australia and 3189 in Queensland. This means 50 per cent of local governing bodies have fewer than 2727 people in Western Australia and 3189 in Queensland.

In the late 1990s, the number of councils in South Australia declined from 118 to 68 as a result of a voluntary structural reform process. Despite this reduction, the median of the population for local governing bodies in South Australia is 8110 which is less than the median for Tasmania (10 941) and considerably less than the median for Victoria (36 780), both of which underwent a similar rationalisation of council numbers in the mid-1990s.

Table 1.3 Selected characteristics of the distribution of population of local governing bodies1 by State, 2002-03

State
Number of bodies
Population of local governing bodies
Minimum
First quartile2
Median3
Third quartile4
Maximum
Average size

NSW
175
58
4 729
13 668
50 467
261 260
37 325
Vic
79
250
16 157
36 780
106 573
193 582
61 129
Qld
157
105
892
3 189
12 302
899 604
22 967
WA
142
141
1 013
2 727
11 433
178 380
13 449
SA
74
76
2 531
8 110
19 205
147 962
20 303
Tas
29
940
5 640
10 941
20 043
62 682
16 216
NT
66
0
271
507
1 103
74 002
3 034
All States
722
0
1 563
6 490
26 256
899 604
26 384

Notes:
1 Includes all local government bodies that received financial assistance grant funding in 2002-03.
2 The first quartile is the population size at which 25 per cent of councils have smaller populations and 75 per cent have larger populations.
3 The median is the population size at which 50 per cent of councils have smaller populations and 50 per cent have larger populations.
4 The third quartile is the population size at which 75 per cent of councils have smaller populations and 25 per cent have larger populations.
Source: Derived from State Grants Commission unpublished data.

Road length maintained

Local governments are responsible for a significant proportion (over 80%) of the nation's roads. Table 1.4 shows that the average length of road for which each local governing body is responsible is 888 kilometres. However, 25 per cent of local governing bodies are responsible for less than 300 kilometres of road maintenance. The council responsible for the longest road length is Brisbane City Council in Queensland with 5285 kilometres. Table 1.4 shows that in New South Wales, Victoria and South Australia the minimum road length is zero. This is due to some local governing bodies, although eligible for assistance under the Local Government (Financial Assistance) Act 1995, not having responsibility for roads.

Table 1.4 Selected characteristics of the distribution of road length of local governing bodies1 by State, 2002-03, in kilometres

State
Number of bodies
Road length of local governing bodies
Minimum
First quartile2
Median3
Third quartile4
Maximum
Average length

NSW
175
0
438
725
1 120
3 245
817
Vic
79
0
579
1 296
2 451
5 153
1 625
Qld
157
2
231
864
1 285
5 285
927
WA
142
9
509
738
1 137
4 181
856
SA
74
0
276
939
1 532
3 874
1 016
Tas
29
151
295
426
731
976
485
NT
66
5
49
125
298
1 514
204
All States
722
0
290
709
1 234
5 285
888

Notes:
1 Includes all local government bodies that received financial assistance grant funding in 2002-03.
2 The first quartile is the population size at which 25 per cent of councils have smaller populations and 75 per cent have larger populations.
3 The median is the population size at which 50 per cent of councils have smaller populations and 50 per cent have larger populations.
4 The third quartile is the population size at which 75 per cent of councils have smaller populations and 25 per cent have larger populations.
Source: Derived from State Grants Commission unpublished data.

Area

Table 1.5 highlights some of the variations in the area of local governing bodies in Australia. It shows that, like population, the area of local governing bodies varies considerably across States.

Nationally, the average area of local governing bodies is just over 7500 square kilometres. However, 50 per cent of local governing bodies have an area of less than 1750 square kilometres. The shire with the largest area is East Pilbara in Western Australia with 378 533 square kilometres. Table 1.5 shows that the minimum for many States is zero square kilometres. Some local governing bodies are recorded as having no area because their boundaries are not defined (for example, Indigenous community councils) or they are not responsible for providing property services within a particular area of land, such as the Outback Areas Community Development Trust in South Australia.

Table 1.5 Selected characteristics of the distribution of area of local governing bodies1 by State, 2002-03, in square kilometres

State
Number of bodies
Area of local governing bodies
Minimum
First quartile2
Median3
Third quartile4
Maximum
Average size

NSW
175
0
194
2 481
4 328
53 511
4 046
Vic
79
0
114
1 529
4 140
22 093
2 882
Qld
157
0
161
2 200
10 504
117 087
11 048
WA
142
2
853
2 000
6 924
378 533
17 515
SA
74
0
56
984
3 831
8 902
2 107
Tas
29
80
654
1 158
3 556
9 750
2 379
NT
66
0
0
4
133
22 142
1 023
All States
722
0
82
1 748
4 439
378 533
7 548

Notes:
1 Includes all local government bodies that received financial assistance grant funding in 2002-03.
2 The first quartile is the population size at which 25 per cent of councils have smaller populations and 75 per cent have larger populations.
3 The median is the population size at which 50 per cent of councils have smaller populations and 50 per cent have larger populations.
4 The third quartile is the population size at which 75 per cent of councils have smaller populations and 25 per cent have larger populations.
Source: Derived from State Grants Commission unpublished data.

Diversity

Local governing bodies differ in almost every way. In addition to size and population, other significant differences between local governing bodies include:

  • range and scale of functions
  • councils' fiscal position (including wide disparity in revenue-raising capacity), resources and skills base
  • physical, economic, social and cultural environments of local government areas
  • attitudes and aspirations of local communities
  • structures of power and influence within local communities and the extent to which elected representatives reflect a broad range of opinion
  • State legislative frameworks within which councils operate, including voting rights and electoral systems.

Indigenous councils are also established under different arrangements in each State and Territory. Indigenous councils can be established under the mainstream local government legislation of the State, or through separate, specific legislation, or can be 'declared' to be local governing bodies by the Federal Minister, on advice from the
State Minister.

Diversity is as great within States as it is between States and goes beyond rural-metropolitan differences. Table 1.6 gives some flavour of this diversity showing, for a selection of councils, the range of areas, populations, local road lengths, income from rates and financial assistance grants per capita. For example, the population of an urban developed council, such as Walkerville in South Australia, of 7144 is similar to that of a rural growth council like Augusta-Margaret River of 10 268 despite the disparity in area - 4 square kilometres and 2370 square kilometres respectively.

Total grants per capita in remote areas are significantly higher than urban, regional or rural areas. This can be explained by the need for assistance in accessing services in remote areas like Diamantina in Queensland with a population of 336 and an area of 94 887 square kilometres. Per capita grant versus per capita rate income varies significantly. The grant per capita for Diamantina of $6358.49 is more than 100 times that of the grant per capita for Wollongong ($62.34) with a population of 188 276 in an area of less than 690 square kilometres. Whereas rates for Wollongong are an average of $356.62 per capita, rates in Diamantina are more than double that at an average of $875. Appendix D lists all councils, the area they cover, their population, their local road length and details of financial assistance grants they receive.

Table 1.6 Characteristics of selected councils, 2002-03

Council State Classification
Population
Area (sq km)
Road length (km)
Rate income ($)
Rate income per capita ($/capita)
2002-03 grant entitlement

General purpose
($)

Local Road
($)

Total
($)

Total grant per capita ($/capita)

Hobart# Tas Capital city
45 954
120
295
41 580 888
904.84
714 274
1 194 291
1 908 565
41.53
Walkerville# SA Urban developed
7 144
4
36
2 652 327
371.27
111 586
50 528
162 114
22.69
Brimbank Vic Urban developed
166 802
123
778
30 079 000
180.33
8 148 412
828 981
8 977 393
53.82
Kwinana WA Urban fringe
21 671
118
282
7 795 123
359.70
366 454
359 045
725 499
33.48
Mornington Peninsula Vic Urban fringe
130 404
724
1 635
42 778 392
328.05
4 151 021
2 182 311
6 333 332
48.57
Mount Gambier SA Urban regional
23 282
27
187
7 143 000
306.80
744 428
234 594
979 022
42.05
Wollongong NSW Urban regional
188 276
684
833
67 143 000
356.62
10 320 834
1 416 348
11 737 182
62.34
Augusta-Margaret River WA Rural growth
10 268
2 370
862
5 057 846
492.58
391 526
555 424
946 950
92.22
Whitsunday Qld Rural growth
15 891
2 693
544
8 276 000
520.80
348 179
334 150
682 329
42.94
Flinders Tas Rural agricultural
940
3 556
386
507 700
540.11
449 187
404 356
853 543
908.02
Esperance WA Rural agricultural
13 291
42 450
4 181
6 012 334
452.36
1 310 777
1 786 946
3 097 723
233.07
Diamantina Qld Rural remote
336
94 887
1 155
294 000
875.00
1 715 746
420 707
2 136 453
6 358.49
Tiwi Island NT Rural remote
2 356
2 115
905
0
0.00
371 482
576 070
946 552
401.76

Note: #=Minimum grant.
Source: Derived from State Grants Commission unpublished data.

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Electorate representation

There is significant variation between the States and the Northern Territory in terms of electoral systems for local government, including more than one system in a single State. Table 1.7 shows the variety of systems including differences in term lengths, voting obligation and the voting system itself, highlighting the great variety in electoral systems across the country. For instance only three States - New South Wales, Victoria and Queensland - have compulsory voting in local government elections, however, most jurisdictions use some level of postal voting. Victoria, Queensland and South Australia have fixed three-year terms, Western Australia and Tasmania hold elections every two years for half of each council and the length of term for councillors in the Northern Territory varies between councils.

Table 1.7 Local government electoral systems in Australia

State Electoral cycle Voting obligation Voting system Other features

NSW 4 years Compulsory Preferential
Vic 3 years Compulsory Full preferential or whole council Proportional Representation Many councils hold all postal elections
Qld 3 years Compulsory Preferential or first past the post Mayors elected directly using same system
WA Half council every 2 years Voluntary First past the post Councils can choose to hold all postal elections
SA 3 years Voluntary Preferential or whole council Proportional Representation All postal voting in Adelaide city
Tas Half council every 2 years Voluntary Voluntary Proportional Representation Universal postal voting
NT 1-4 years Voluntary Varies Universal postal voting

Source: Commonwealth Local Government Handbook 2002, p. 10.

Table 1.8 shows there is significant variation in councillor numbers across the States and the Northern Territory. Where Victorian councillors represent, on average, more than 7800 people each, Northern Territory councillors represent less than 300 people each.

While the national average for female councillors is around 20 per cent, in the Northern Territory around one-third of all councillors are women, more than double that of Western Australia. More than 85 per cent of councillors in the Northern Territory are Aboriginal or Torres Strait Islander, which helps to raise the national average to slightly over 10 per cent of all councillors. However, the second highest percentage of Aboriginal or Torres Strait Islander councillors is in Western Australia with less than 2 per cent.

Table 1.8 Local government councillor numbers by State, September 2003

State
Population December 2002
Councils1
Councillors
Councillors who are women
Councillors of Aboriginal or Torres Strait Islander descent
Average number of councillors per council
Average population per councillor

(no.)
(no.)
(no.)
(%)
(no.)
(%)
NSW 2
6 671 426
172
1 760
471
26.8
28
1.6
10.2
3 791
Vic
4 902 920
79
623
173
27.8
2
0.3
7.9
7 870
Qld 3
3 750 543
134
1 160
N/A
N/A
N/A
N/A
8.7
3 233
WA
1 940 485
142
1 360
210
15.4
25
1.8
9.6
1 427
SA 4
1 524 136
69
751
198
26.4
1
0.1
10.9
2 029
Tas 5
474 388
29
274
68
24.8
N/A
N/A
9.5
1 731
NT
197 374
63
708
240
33.9
605
85.5
11.2
279

Total
19 461 272
688
6 636
1 360
20.5
661
10.1
9.7
2 933

Notes:
1 Council numbers from local government authorities exclude some non-affiliated local governing bodies and does not cover all 722 local governing bodies that receive financial assistance grants.
2 New South Wales data is from 1999 elections, no later separated data was available at time of printing. From Candidates and Councillors 1999-2000, published January 2001.
3 Queensland has no legislative requirement for local governments to provide data on the number of female or Aboriginal or Torres Strait Islander councillors.
4 South Australia - Figures correct as at May 30. Identification as Aboriginal or Torres Strait Islander is optional on councillor declaration forms.
5 Tasmania - Data on councillors of Aboriginal or Torres Strait Islander descent is not collected.
Sources: Unpublished from State local government Associations and State Departments responsible for local government, Data for Queensland from Population data from ABS 2003, Australian demographic statistics, cat. no. 3101.0, Sep 2003.

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National representation of local government

Australian Local Government Association

The Australian Local Government Association (ALGA) is a federation of local governing body associations from each of Australia's six States and the Northern Territory. Since early 2001 ALGA membership has included the Australian Capital Territory Government. The Association aims to add value, at the national level, to the work of State and Territory associations and their member councils. ALGA represents the interests of local government through its participation in the Council of Australian Governments (COAG) and membership of a number of ministerial councils.

Local Government Managers Australia

Local Government Managers Australia is a professional association of local government managers throughout Australia and the Asia-Pacific. Local Government Managers Australia is committed to developing and improving local government management and maintaining high professional and ethical standards.

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Involvement in intergovernmental structures

Council of Australian Governments

COAG is the peak intergovernmental forum in Australia comprising the Prime Minister, State Premiers, Territory Chief Ministers and the ALGA President. COAG's role is to initiate, develop and monitor the implementation of policy reforms which are of national significance and which require cooperative action by Australian governments.

Issues COAG considers generally arise from international treaties that affect the States and Territories, initiatives of one government that impact on other governments, and Ministerial Council deliberations. Ministerial Councils are regular meetings of Commonwealth, State and Territory Ministers sharing common responsibilities.

There are over 40 Commonwealth-State Ministerial Councils and forums currently facilitating consultation and cooperation between governments. Ministerial Councils initiate, develop and monitor policy reform and take joint action to resolve issues that arise between governments. In particular, they develop policy reforms for COAG consideration and oversee implementation of policy reforms agreed to by COAG.

Local Government and Planning Ministers' Council

In June 2001, COAG announced the streamlining of Ministerial Councils. Ministerial Councils in related functional fields were combined to strengthen their strategic direction and improve opportunities for cooperative policy development.

The Local Government Planning Ministers' Council is an amalgamation of the former Local Government Ministers' Conference and the Planning Ministers' Conference. The Council includes Federal, State and Territory local government and planning ministers, the New Zealand Minister and the ALGA President.

The Council met for the first time in Darwin in July 2003. It's primary objective is to lead debate and decision making on key strategic policy matters for local government and planning in Australia and New Zealand that can be addressed at the national level.

The Council's Terms of Reference are:

  • to agree policy and strategic approaches for local government and planning issues
  • to exchange information and brief jurisdictions on significant current and emerging local government and planning issues, experiences and initiatives
  • to promote cooperation between all levels of government and to encourage harmonisation across jurisdictional boundaries in the development and implementation of public policy, strategies and programs affecting local government and planning
  • to foster accountability to stakeholders through the monitoring and evaluation of policies, strategies and programs developed and implemented under the aegis of the Council
  • to provide leadership to all areas of government, industry and the community in working collaboratively to advance local government and planning issues
  • to liaise with other Ministerial Councils and other bodies on matters relevant to the activities of the Council.

The Council is supported by the Local Government and Planning Joint Committee with the Local Government Joint Officers Group and the Planning Officials Group as standing sub-committees. The Local Government and Planning Joint Committee comprises senior officers from Commonwealth, State, Territory and the New Zealand Departments with responsibility for local government and planning matters, and a senior representative from ALGA.

Other ministerial councils

In its review of ministerial councils, COAG agreed that local government be represented on ministerial councils where there is a clear local government interest. Other than where membership is explicitly set out by statute or agreement, it is up to individual ministerial councils to decide whether ALGA should be a member or attend proceedings.

Within the Transport and Regional Services portfolio, in addition to being a member of the Local Government Planning Ministers' Council, ALGA is also a member of the Regional Development Council and an observer on the Australian Transport Council.

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Local government finances

Share of taxation revenue by level of government

In 2001-02, local government's share of taxation revenue was $6.7 billion - that is 3.1 per cent of all taxes raised across all levels of government. Local government's taxation revenue is exclusively raised through land rates. This represents a slight increase on last year's taxation revenue for local government, see Figure 1.2.

Figure 1.2 Composition of taxation revenue, by sphere of government,1998-99 to 2001-02 national report

Share of expenditure by function by level of government

Table 1.9 highlights the variety of roles in which local government is engaged. Apart from defence spending, where only the Australian Government has a role, local governing bodies expend part of their total revenue on all other major functions of the three levels of government. Local governing bodies retain only a small role in providing funds for energy and fuel and agriculture, forestry and fishing. Transport and communications, and housing and community amenity represent the areas of highest expenditure for local governing bodies.

Table 1.9 Composition of expenditure for the Australian public sector, 2001-02

Expenditure
Federal (%)
Multi-jurisdictional sector (%)
State (%)
Local (%)
Total (%)

General public service
3.06
0.04
1.45
0.90
5.45
Defence
3.74
-
-
-
3.74
Public order and safety
0.58
-
2.94
0.11
3.62
Education
3.65
3.06
8.42
0.01
15.13
Health
8.60
-
7.47
0.08
16.15
Social security and welfare
21.52
-
1.92
0.29
23.73
Housing and community amenity
0.69
-
1.71
1.19
3.58
Recreation and culture
0.63
-
0.74
0.68
2.05
Fuel and energy
0.95
-
0.33
0.00
1.29
Agirculture, forestry and fishing
0.53
-
0.73
0.01
1.27
Mining, manufacturing and construction
0.53
-
0.24
0.05
0.81
Transport and communications
0.82
-
2.68
1.44
4.95
Other
14.96
0.01
2.85
0.39
18.21
Total
60.26
3.11
31.48
5.16
100.00

Note: The multi-jurisdictional sector comprises mainly public universities.
Source: ABS, Government Finance Statistics cat. no. 5512.0

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Grant funding

Australian Government funding

The Australian Government provides considerable financial assistance to local government through specific purpose payments and direct program funding.

Specific purpose payments

Specific purpose payments to local governments from the Australian Government are either made direct to local governing bodies (for example, Roads to Recovery funding) or through the States (for example, local government financial assistance grants and Regional Flood Mitigation Program payments). Direct specific purpose payment funding to local governments in 2001-02 amounted to over $279 million (see Table 1.10). This assistance recognises the work of local government in providing such services as child care, aged care, care for the disabled, natural disaster relief and for local roads. Of the direct specific purpose payments paid to local governing authorities, more than $200 million was provided under the Roads to Recovery program.

Specific purpose payments that provide funding through the States to local government are the financial assistance grants. In 2002-03 the Australian Government provided around $1.445 billion in local government financial assistance grants to local governing bodies. These grants are administered through the Local Government (Financial Assistance) Act 1995. More information on the means of distributing financial assistance grants is contained in Chapter 2.

Table 1.10 Specific purpose payments direct to local government authorities by State, 2002-03 ($'000)

Payment title
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Total

Direct payments - current

Aged care services
9 114
9 394
1 338
3 199
3 698
3 487
0
1 171
29 401
Disability services
401
86
351
0
0
0
0
0
838
Children's services
15 780
17 944
5 492
3 154
1 113
2 211
0
1 053
46 747
Roads to Recovery program
57 969
40 242
40 985
29 043
18 108
6 640
3 333
3 680
200 000

Total current
83 264
67 666
48 166
35 396
21 919
11 338
3 333
5 904
276 986
Direct payments - capital

Aged care services
0
0
0
0
0
0
0
0
0
Children's services
218
249
76
44
15
31
0
15
648
Natural Heritage and Water Park, Goondiwindi
0
0
320
0
0
0
0
0
320
Bert Hinkler Hall of Aviation
0
0
50
0
0
0
0
0
50
Development of sewerage schemes for Boat Harbour Beach and Sisters Beach
0
0
0
0
0
1 000
0
0
1 000

Total capital
218
249
446
44
15
1 031
0
15
2 018

Total direct payments
83 482
67 915
48 612
35 440
21 934
12 369
3 333
5 919
279 004

Source: 2002-03 Final Budget Outcome, Department of Finance and Administration.

Other Australian Government Program Funding

In 2002-03, local government was eligible to apply for and receive funding from a wide range of Australian Government programs, such as the Road Safety Black Spot Program, Regional Solutions Program and Rural Transaction Centres Program. However, details of the funding received by local government are not tabulated.

Information about the extensive range of Australian Government funding programs can be found at www.grantslink.gov.au.

State funding

The States and the Northern Territory offer a variety of grants to local government for specific purposes and services. Table 1.11 details the grants made available to local government by purpose for 2001-02. This table also includes Australian Government funding provided to local governing bodies through the States, including more than $1.36 billion in Australian Government financial assistance grants provided in that year. The remaining State grants are directed to a wide variety of purposes, reflecting the different functions required of local governing bodies. While the focus of State grants varies significantly from State to State and from year to year, funding for road transport remains a major focus. In 2002-03 the States provided $1.14 billion to local government out of their own funds, representing a decrease of almost 25 per cent on the previous year. On a per capita basis, State grants vary considerably from $10.59 per capita in Tasmania to $131.81 per capita in Queensland.

Table 1.11 Grants from States to local government, by purpose, 2001-02 ($m)

Purpose
NSW
Vic
Qld
WA
SA
Tas
NT
Total

General public services
-
39
184
-
-
-
3
213
Fire protection
66
-
-
-
-
-
-
66
Public order and safety
-
1
2
-
-
-
-
3
Water / Sanitation / Environment
62
8
2
-
10
2
-
84
Pre-school education
-
76
-
-
-
-
-
76
Social security and welfare
-
-
47
-
10
-
1
58
Recreation and culture
26
69
80
13
10
-
7
205
Agriculture, forestry and fishing
7
4
11
-
-
-
-
22
Road transport
140
-
34
265
27
26
-
492
Other tranport and communication
2
-
35
-
-
-
-
37
Other natural disaster relief
14
-
-
-
-
-
-
14
General purpose inter-governmental transactions
328
-
287
-
75
23
20
733
Other community development
2
351
34
1
-
-
7
395
Other economic affairs
2
80
27
1
-
1
-
111
Other
-
-
-
4
-
-
-
4

Total
649
628
743
284
132
52
38
2513
Less Australian Government financial assistance grants
General purpose grants
328
239
180
94
75
24
10
950
Local road grants
124
88
80
66
24
23
10
415

Net State grants
197
301
483
124
33
5
18
1148
Net State grants per capita
29.66
62.01
131.59
64.62
21.73
10.57
90.06
59.55

Source: ABS unpublished data.

State reporting on funding (Queensland, South Australia and Tasmania)

Budget papers for Queensland, South Australia and Tasmania for 2003 report the grant funding that is to be paid to local government. The budget papers identify the role of State governments in providing grants to local governments and also outline the role of the States in allocating financial assistance grants through the Local Government Grants Commissions in each State. In the recent budget papers, the South Australian Government outlined the financial position of local government within the State showing that local government consistently returns a relatively small net borrowing result and that the level of debt in comparison to physical assets leaves local government in South Australia in a sound financial position.

The South Australian Government has created a number of financial institutions to manage, on behalf of councils, particular commercial arrangements, such as the Local Government Superannuation Scheme.

The South Australian government provides specific purpose payments to local government for a range of services and activities, from a variety of portfolios. For example, Premier and Cabinet provides funding for Public Library Services and the Cultural Facilities and Equipment Program, while the Department of Human Services provides funding for National Youth Week and Vaccinations. In total, the South Australian government provided more than $67 million in specific purpose payments from State to local government in 2002-03 and has budgeted for more than $74 million in 2003-04.

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Reliance on grants

Figures 1.3 and 1.4 show the distribution of the proportion of total local government revenue derived from government grants for Victorian and Queensland councils respectively. These figures show that generally urban councils are less reliant on grants compared with regional councils, regional councils are less reliant than rural councils and remote councils are the most reliant. Generally, Victorian councils are less reliant on grants when compared to Queensland councils. To a large extent, this reflects the larger size of Victorian councils in terms of population and the higher population density in Victoria.

Figure 1.3 Distribution of the proportion of revenue from government grants for Victorian councils, 2001-02

Figure 1.4 Distribution of the proportion of revenue from government grants for Queensland councils, 2001-02

Revenue

There is a wide disparity in the ability of individual councils to raise revenue due largely to differences between urban, rural and remote councils, in population size, rating base, the ability or willingness of councils to levy user charges and the cost of providing services.

In 2001-02 there was a slight increase in the average proportions of revenue local government raised from taxes and the sale of goods and services compared to the previous year.

A corresponding small decrease in revenue from interest, grants and subsidies and other revenue sources was evident.

The national averages for proportions of revenue from particular sources do however disguise the circumstances of individual councils which vary considerably. While a general indication of these variations can be obtained from Figure 1.5 and Table 1.12, it should be noted that significant variation in revenue raised between councils within the States and the Northern Territory remains.

Figure 1.5 Local government revenue by source, 2001-02

Rates

The proportion of revenue raised by local government from taxation varied appreciably between the States, from a high of 59 per cent for South Australia down to 26.8 per cent for the Northern Territory. Revenue from grants was close to the average of 12.2 per cent for all States with the primary exception of the Northern Territory where grant revenue accounted for 27.9 per cent of total revenue (see Table 1.12).

Table 1.13 shows that, on a per capita basis, taxation revenue is similar for all States at about $350 per capita. The Northern Territory continued to have the lowest taxation revenue per capita of $240, whilst South Australia remained the State with the highest per capita taxation revenue for local government of $388 per person.

Rates in each State and the Northern Territory are based on a valuation of the land upon which they are charged. However methods for assessing land value differ significantly between States (see 'Comparison of land value assessments used to calculate rates charges'). New South Wales and Queensland have a statewide requirement that rates be based on the unimproved value of the land. Victoria however, operates on a differential system where different valuation assessments are used depending on the type or the primary use of the land. In the Northern Territory a variety of systems may be used for rate assessments and the way they are applied is at the discretion of the individual council.

Comparison of land value assessments used to calculate rates' charges

Property taxes, or rates, account for almost 40 per cent of the total revenue of local government and are the only source of taxation revenue available to the third tier of government. The methods by which rates are charged varies significantly between jurisdictions. Exemptions are provided to Crown Land, including defence land and national parks in all jurisdictions.

New South Wales rates' charges are based on the unimproved value of the land. Pensioner concessions are made available to New South Wales ratepayers, as land values may not reflect the actual income of the owner. This helps reduce the impact of property value increases on long term residents. New South Wales rates are also limited by a system of rate pegging that has been in place since 1977. Percentage increases permitted are dictated by the State government. Queensland follows a similar approach to rates using the unimproved value of the land as the basis for the rates. However, Queensland does not impose rate limits on its councils.

Victoria relies on a differential system for rate charges where the type of land, or the predominant use of the land determines the method of calculation. Site value (unimproved land value), net annual value (rental value) or the capital improved value of the land are all acceptable methods in Victoria for calculating the land rates. For rural land, net annual value is taken to be 5 per cent of the capital improved value of the land, or the sum the land might be expected to realise if offered for sale at the time of valuation.

Western Australia uses gross rental value of the land, that is, the amount that could potentially be charged should it be made available for rent, as the basis for non-rural rates charges. Rural land is predominantly assessed on the unimproved value of the land, however this can change depending on the extent of improvements or the primary use of the land.

South Australian councils, like Victorian councils, can use the capital (improved) value, the site (unimproved) value or the annual (gross rental) value of the property. There is no differentiation for rural property, however, 85 per cent of the State is unincorporated (that is, not covered under a local council area).

Tasmanian rates are also based on one of the three criteria used in South Australia and Victoria. However, recent agreements in Tasmania between the Tasmanian State Government and local councils has meant local councils are now able to charge rates on selected State Government-owned land. This will increase the amount of revenue local governments can realise from rates.

The Northern Territory allows individual councils to determine the method and extent of rate charges in the council area, however, calculation of rates is still based on the unimproved capital value, the improved capital value or the annual rental value of the land. Rates can be charged on a flat parcel rate, where all land is charged at the same rate regardless of use or value. Alternatively, a differential rate similar to that used in Victoria, or a uniform rate can also be used.

Other revenue sources for local governing bodies

Local government receives a significant proportion of revenue from the sale of goods and services.
It represents, on average, close to one-third of council revenue, with Tasmania and Queensland receiving more than 40 per cent of their revenue in 2001-02 from these sources. This difference may be because, in those States, local government is responsible for providing water and sewerage services.

In 2001-02, $2.15 billion in grants was provided to local government. Revenue from government grants contribute a significant portion of total revenue for local governing bodies especially for rural and regional communities, representing more than 12 per cent of revenue. In some rural and remote areas, the government grants can constitute more than 50 per cent of the revenue for some councils. In general, urban councils have the greatest degree of financial autonomy.

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State comparison of source of funds

Table 1.12 Local government revenue sources by State, 2001-02 ($m)

NSW
Vic
Qld
WA
SA
Tas
NT
Total

Taxation revenue
$
2260
1640
1329
707
589
175
48
6749
%
37.8
44.8
28.2
44.1
59.0
36.4
26.8
38.3
Sale of goods and services
$
2037
753
2159
356
204
195
59
5762
%
34.1
20.6
45.8
22.2
20.4
40.5
33.0
32.7
Interest
$
187
44
76
39
13
10
4
372
%
3.1
1.2
1.6
2.4
1.3
2.1
2.2
2.1
Grants and subsidies
$
537
585
486
280
147
69
50
2154
%
9.0
16.0
10.3
17.5
14.7
14.3
27.9
12.2
Other revenue
$
959
640
665
220
45
32
18
2579
%
16.0
17.5
14.1
13.7
4.5
6.7
10.1
14.6

Total
$
5980
3662
4714
1602
998
481
179
17617
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00

Source: ABS, Government Finance Statistics, cat. no. 5512.0

Table 1.13 Local government revenue by source by State, $ per capita, 2001-02

NSW
Vic
Qld
WA
SA
Tas
NT
Average

Taxation revenue
340.21
337.86
362.08
368.46
387.79
369.78
240.16
350.08
Sale of goods and services
306.64
155.13
588.21
185.53
134.31
412.04
295.19
298.89
Interest
28.15
9.06
20.71
20.33
8.56
21.13
20.01
19.30
Grants and subsidies
80.84
120.52
132.41
145.92
96.78
145.80
250.17
111.73
Other revenue
144.37
131.85
181.18
114.65
29.63
67.62
90.06
133.78

Total
900.21
754.41
1284.31
834.89
657.07
1016.37
895.59
913.83

Source: ABS, Government Finance Statistics, cat. no. 5512.0

Comparison of rates revenue

Figures 1.6 and 1.7 show how rates per capita have grown since 1998 when comparing rates in each State and the Northern Territory as well as rates in comparison to gross domestic product per capita.

Both Tasmania and the Northern Territory have experienced significant levels of growth in per capita rates, whereas New South Wales and the Australian Capital Territory have maintained a much slower rate of growth. Total rates per capita across all jurisdictions have maintained a relatively consistent rate of growth of around 4-5 per cent per year, while financial assistance grants per capita have grown at around 2-3 per cent per year. Gross domestic product per capital has recently experienced a large growth rate, increasing by around 15 per cent between 2000-01 and 2001-02.

Figure 1.6 Growth in rates per capita from 1998-99 to 2001-02,by State (1998-99 =100%)

Figure 1.7 Growth in total rates per capita from 1998-99 to 2001- -02 compared with growth in gross domestic product per capita (1998-99 =100%)

Expenditure

Local government expenditure continues to be dominated by transport and communications (28%) followed closely by housing and community amenities (23%). See Figure 1.8 and Table 1.14.

Figure 1.8 Local government expenditure by purpose, 2001-02

Table 1.14 Local government expenditure by purpose, by State, 2001-02 ($m)

NSW
Vic
Qld
WA
SA
Tas
NT
Total

General public services
$
927
458
1033
147
181
65
73
2886
%
16.9
12.9
24.3
9.9
17.9
13.2
27.3
17.4
Public order and safety
$
152
62
52
58
12
6
2
344
%
2.8
1.7
1.2
3.9
1.2
1.2
0.7
2.1
Education, health and welfare
$
285
642
77
107
54
29
47
1241
%
5.2
18.0
1.8
7.2
5.3
5.9
17.6
7.5
Housing and community amenity
$
1340
643
1191
224
187
166
59
3810
%
24.4
18.1
28.0
15.1
18.5
33.8
22.1
23.0
Recreation and culture
$
595
608
391
325
166
62
20
2167
%
10.9
17.1
9.2
21.9
16.4
12.6
7.5
13.1
Transport and communication
$
1793
871
1081
484
250
120
38
4637
%
32.7
24.5
25.4
32.6
24.8
24.4
14.2
28.0
Other
$
390
278
426
141
159
42
27
1465
%
7.1
7.8
10.0
9.5
15.7
8.6
10.1
8.9

Total
$
5482
3562
4252
1486
1010
491
267
16551
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00

Source: ABS, Government Finance Statistics, cat. no. 5512.0

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State comparison of levels of expenditure by purpose

Table 1.15 shows that, on a per capita basis, expenditure on general public services varies significantly from as low as $76.61 per capita in Western Australia, to as high as $365.24 in the Northern Territory. Queensland and Tasmania both record high per capita spending on housing and community amenities at $324 and $350 per capita respectively. Funding for transport and communications averages $240.53 per capita with Queensland the highest spenders at $294.51 per capita, followed closely by New South Wales at $269.91 per capita.

Table 1.15 Local government expenditure per capita, by purpose, by State, 2001-02 ($m)

NSW
Vic
Qld
WA
SA
Tas
NT
Average

General public service
139.55
94.35
281.44
76.61
119.17
137.35
365.24
149.70
Public order and safety
22.88
12.77
14.17
30.23
7.90
12.68
10.01
17.84
Education, health and welfare
42.90
132.26
20.98
55.76
35.55
61.28
235.16
64.37
Housing and community amenity
201.72
132.46
324.48
116.74
123.12
350.76
295.19
197.63
Recreation and culture
89.57
125.25
106.53
169.38
109.29
131.01
100.07
112.41
Transport and communication
269.91
179.43
294.51
252.24
164.60
253.56
190.13
240.53
Other
58.71
57.27
116.06
73.48
104.68
88.75
135.09
75.99

Total
825.24
733.81
1158.44
774.44
664.97
1037.50
1335.88
858.53

Source: ABS, Government Finance Statistics, cat. no. 5512.0

Assets and liabilities

In 2001-02 local government in Australia had a net worth of over $154 billion, with net assets of more than $163 billion and liabilities of $9.2 billion (see Tables 1.16 and 1.17). Local government again achieved a growth in assets from 2000-01 (4.1%) greater than the growth in liabilities (2.2%). The growth rate for liabilities was unchanged from last year's rate.

Table 1.16 Local government financial assets and liabilities, 30 June 1995 to 30 June 2002 ($m)

Year
1995
1996
1997
1998
1999
2000
2001
2002

Gross debt
6435
6080
6182
6307
6168
7452
7504
5721
Total cash, deposits and lending
4854
5814
5524
5451
5940
8982
9507
7399

Net debt (worth)
1581
266
658
856
228
(1530)
(2003)
(1677)

Source: ABS, Government Finance Statistics, cat. no. 5512.0

Table 1.17 Local government assets and liabilities, at 30 June 2002 ($m)

NSW
Vic
Qld
WA
SA
Tas
NT
Total

Assets
Financial assets
Cash and deposits
232
513
1 245
207
18
43
57
2 315
Advances paid
-
7
-
-
-
4
-
11
Investments, loans and replacements
3 660
503
265
443
33
120
48
5 073
Other non-equity assets
634
600
436
163
76
45
14
1 967
Equity
-
-
-
-
12
-
-
12

Total
4 525
1 623
1 946
813
138
212
119
9 377

Non-financial assets
Land and fixed assets
63 747
31 090
33 914
10 744
8 481
4 251
887
153 115
Other non-financial assets
988
-
-
16
-
10
4
1 017

Total
64 735
31 090
33 914
10 759
8 481
4 261
890
154 132

Total
69 260
32 714
35 860
11 573
8 620
4 474
1 010
163 509
Liabilities
Deposits held
-
62
-
-
79
3
-
144
Advances received
12
2
-
-
14
-
-
29
Borrowing
1 411
596
2 970
223
135
208
6
5 548
Unfunded superannuation liability and other employee entitlement
738
285
391
85
74
32
9
1 614
Other provisions
112
-
12
2
9
6
-
142
Other non-equity liabilities
691
405
339
177
102
40
34
1 788
Total
2 965
1 350
3 713
488
412
289
49
9 266
Shares and other contributed capital
1
-
-
-
-
-3
-
-2
GFS net worth
66 294
31 363
32 148
11 085
8 207
4 188
961
154 246
Net debt
-2 468
-363
1 460
-428
177
44
-100
-1 677
Net financial worth
1 559
273
-1 767
325
-274
-73
71
114

Source: ABS, Government Finance Statistics, cat. no. 5512.0

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International comparisons

Australia is one of 30 member countries of the OECD. The OECD groups countries with similar commitment to democratic governance and the market economy. The OECD regularly produces statistics and publications comparing various aspects of member and non-member countries including information on population, health, education, environment, development, labour, trade and finance. Information in this section has been sourced from the OECD Centre for Tax Policy and Administration publication Revenue Statistics 1965-2001: 2002 Edition.

Comparisons have been made between Australia and a number of OECD countries with similar Federal systems:

  • Austria
  • Belgium
  • Canada
  • Germany
  • Mexico
  • Switzerland
  • United States

As has been seen with information provided for each Australian State and the Northern Territory, there can be significant differences between individual local governing bodies and different jurisdictions. Data provided in this section are national averages only. Significant variation is highly likely between individual local governing bodies.

Size of sector

The local government sector in OECD countries varies depending on the nature of the other levels of government in the countries, the extent of local government involvement in services such as health, education and policing, areas of major public spending, and the sources for local government revenue.

Taxation revenue

Figure 1.9 provides a comparison of the percentage of taxes local governments in selected OECD countries raise. Figure 1.10 shows this tax revenue as a percentage of gross domestic product. The selected countries all operate under a federal system of government. In all countries, except Belgium and Mexico, the proportion of total tax revenue raised by local government has decreased since 1975. Australia has the second lowest percentage of taxes raised by local government at 3 per cent in 2000, compared with Mexico's the lowest at 0.8 per cent. Switzerland's local governing bodies continue to raise the highest percentage of taxes of the selected countries, although this has fallen in the last 25 years, from a high of 19 per cent in 1975 to 14 per cent in 2000. The variation in revenue primarily reflects the different statutory and legislated functions of local governments in each of the countries.

Figure 1.9 International comparison of the percentage of taxes raised by local government in OECD countries under a federal system of government, 1975,1985 and 2000 national report

Figure 1.10 Tax revenue raised by local government as a percentage of gross domestic product in OECD countries with a federal system

Sources of revenue

Local government revenue sources in OECD countries are remarkably diverse. There is variation in the number and scope of local taxes, and the extent to which tax bases are allocated to local government.

Local governing bodies in certain OECD countries receive a sizeable portion of total revenue from taxes other than property or land-based taxes. Austria, Belgium, Germany and Switzerland receive between 35 per cent and 85 per cent of total tax revenue from taxes on income and profits, with Austrian local governing bodies receiving around 20 per cent of total tax revenue from payroll taxes, see Figure 1.11. Australian local governing bodies receive 100 per cent of tax revenue from property taxes, and Canadian local governments are also heavily dependent on property taxes for tax-based revenue, at around 91 per cent. Australia and Canada have comparable proportions of total revenue from taxes of around 40 per cent.

Figure 1.11 Sources of tax revenue as a percentage of total tax revenue for local government in OECD federal countries, 2000

Reliance on grants

Most OECD countries rely on intergovernmental transfers or grants for a substantial proportion of their revenue. Constitutional variation between OECD countries means the determination of transfers can be quite different. Australian local governments are the least dependent on grants of the OECD countries identified in Figure 1.12, where grants represented around 15 per cent of total revenue for Australian local governments in 1999, followed closely by Switzerland at around 18 per cent. The local governing bodies in Belgium are the most reliant on grants, receiving around 50 per cent of their revenue from such sources. The extent of a country's reliance on grant revenue corresponds to its ability to raise revenue through other sources, either through tax-based or non-tax-based means, such as user charges.

Figure 1.12 Proportion of revenue by source for local government in OECD federal countries, 1999

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