Opinion Editorial - Cost pressures beyond control of our councils

Blaming councils for rate rises misses the bigger picture, writes Dion Lester.

In recent weeks, we have seen commentary on council budgets and rate increases.

Councils primarily generate revenue through property taxes (rates), user charges for services like parking, and grants from state and federal governments.

At the same time, council costs are impacted by a range of factors, some within their control, but others not. Often council rate changes are measured against the Consumer Price Index, yet CPI alone does not reflect the full cost to councils in delivering services. Infrastructure and wage costs also have a big impact. The other cost drivers are decisions made by other levels of government.

Take infrastructure, for example. Tasmanian councils manage more than $11.8bn of infrastructure, which includes 80 per cent of the roads in Tasmania and a range of other important community facilities. In the last three years, the cost of construction materials alone has increased by 30 per cent. Meanwhile, CPI has increased by less than half that at the same time. A good example of this is the recent announcement that the construction costs for the AFL high-performance centre, at Kingston, have increased from $60m to more than $100m.

So why not cut services, as some have suggested. The question is, which bowls club or playground should councils close? Or which local road or bridge should they let fall into disrepair? It is these very services that support the productivity of our economy, underpinning the agricultural and tourism sectors, local businesses and the wellbeing of our local communities.

It seems perverse to blame our councils for rate rises when they don’t have all the tools they need to reduce their reliance on rates for their financial sustainability.

The problem is not with individual councils, but with the broader funding environment itself. They face a range of pressures beyond their control and have only limited options available to them to respond.

A prime example is the State Government’s Heavy Vehicle Motor Tax; a user-based charge to recover road construction and maintenance costs resulting from heavy vehicle road usage. Each year, the state government collects around $30m from the Heavy Vehicle Motor Tax. Yet only $1.5m of this is provided to councils, even though they manage 80 per cent of Tasmania’s road network. This amount has not changed in 20 years, not even for CPI, not by a single cent – imagine not having a pay rise for a quarter of a century! This is while the state government's share has more than doubled.

As a result, councils are forced to raise rates to cover the costs of heavy vehicle road access.

Councils support community wellbeing and the economy in a range of important ways. There are things local councils can do better than other spheres of government, provided they have the appropriate resources at their disposal. This requires our state government to fairly redistribute the revenue they collect, such as the Heavy Vehicle Motor Tax, to ensure councils have the right tools to support their financial sustainability. Without this, the burden falls onto councils and ultimately local communities.

Dion Lester is the chief executive of the Local Government Association of Tasmania.

As published in The Mercury on 12 June 2025.