COUNCIL rate rises will be capped at 1.75 per cent next financial year as the Victorian government tries to ease cost of living pressures, despite claims it hurts ratepayers more than it helps.
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Rate rises have been tied to the consumer price index since 2016.
Local government minister Shaun Leane said the cap gave councils clear budget frameworks while allowing essential services to be delivered.
A recent Australia Institute report found the cap was placing increasing pressure on councils and had limited jobs growth by 7425 roles in 2021-22.
"Far from 'protecting' ratepayers ... rate caps hurt them, in several different ways: through compromised service delivery, through lower levels of employment and/or wages amongst residents employed in the local government sector, through higher fees collected through other revenue tools (such as user fees), and through lower expenditures flowing back into the private sector," researchers said.
The research, which was commissioned by the Australian Services Union, found pressure will continue to build on Victoria's councils unless the government's "one size fits all" policy of tying rate rises to the consumer price index is removed.
It found smaller and rural councils were more likely to report financial distress after almost five years of rate capping.
"In smaller towns and communities, local government is a crucial source of decent, socially valuable jobs, performed by well-qualified people, earning (and spending) decent incomes in their communities," researchers said.
Minister for local government Shaun Leane defended the cap, which this financial year has locked rate rises to 1.5 per cent or less.
"The Fair Go Rates System helps reduce cost-of-living pressures for Victorians," he said.
"It was introduced to limit uncontrolled hikes and in 2021-22 the rate cap was the lowest it has been since it was introduced in 2016."
Before 2016, Victorian council rates were rising by as much as six per cent a year.
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