September 21, 2009 5:37am by David Farrar

Hickey on Rates

Here’s the problem: local government is growing at least five times faster than the rest of the economy. Those costs are being passed on directly to ratepayers in the form of rates, fees and fines that are growing at least four times faster than prices elsewhere in the economy.

The latest Local Authority Statistics released this week showed council spending nationwide rose 10 per cent to $6.21 billion in the year to June from the previous year.

Total revenues collected rose 6.8 per cent to $6.15 billion, which meant the collective council budget balance slumped into a deficit of $56 million. That will eventually be reflected in higher debt.

To put this growth in spending and rates into context, our economy contracted 1 per cent in the year to March in real terms and was flat in actual terms unadjusted for inflation. So how are all these revenues raised? General rates nationally rose 7.8 per cent to $3.33 billion in the year to June, while water rates rose 10.3 per cent to $263 million. Fees and fines rose 10 per cent to $376.6 million. Meanwhile the Consumer Price Index rose only 1.9 per cent in the year to June.

Generally rates should only increase in line with population growth and inflation in my opinion. When rates are growing faster than overall economic growth, the situation is not sustainable in the long term.