Government’s 3% rate cap highlights flawed system

When councils are financially sustainable, they can invest in their neighbourhoods, towns and communities to deliver the services that people depend on like safe roads, libraries, sports fields, parks, kindergartens and arts and culture.

While it’s a slight increase – up from 2.75 percent in 24/25 – councils will have little relief from the extreme financial pressures they have faced in the last four years.

The Municipal Association of Victoria (MAV) will continue to call for a significant review of the rate capping system.  MAV President Cr Jennifer Anderson said the local government sector is ready and willing to work with the State Government.

“With Minister Staikos getting his feet under the desk over summer, the MAV is very keen to have a constructive discussion about how we can reform the rate cap to be more fit for purpose for our diverse communities across Victoria,” Cr Anderson said.

“Using CPI to inform the rate cap simply doesn’t work for councils. It’s not a true reflection of the increased costs our sector faces in construction, materials, staff wages, and services.”

“The MAV is working on a more accurate Local Government Cost Index for Victoria and is keen to share this work with the State Government to improve how the rate cap can be re-imagined in the future.”

“The current rate cap does not take into account the vastly different needs of councils across the state. Some councils are still facing exhaustive repair bills from natural disasters, others are in desperate need of upgraded or new infrastructure. Setting a single rate cap does not account for the broad variety of these challenges, let alone the role that local governments play in supporting the economy.”

“Beyond a more accurately calculated rate cap, the MAV is committed to working with both state and federal government to ensure the financial sustainability of councils in 2025,” Cr Anderson said.