The Queensland Audit Office’s Local government 2020 Audit Report has identified that 25 Queensland local governments, around one-third of the total, “are at a high risk of not being financially sustainable.” As the QAO hints on pages 21 to 22, the underlying problem is that Queensland has too many small councils with inadequate revenue-raising capabilities (i.e. low total values of properties they can levy rates on). These councils are heavily reliant on state and federal grants. Here’s what the QAO writes:
Councils with smaller populations and smaller local economies are more dependent on government grants to provide basic services, and build and maintain essential community assets (such as roads). These councils receive grants from both the state and federal governments for supplementing their day-to-day operations (for example, through financial assistance grants) and for building and maintaining community assets (also known as capital grants). However, these grants typically provide funding for a single year with little certainty whether the funding will continue in subsequent years.
Such uncertainty makes it difficult for councils that are highly reliant on grants to make longer-term plans to create jobs in the community and attract residents.
The major recommendation the QAO makes to the state government (on p. 6) is to “Provide greater certainty over long-term funding”. It’s a shame the QAO didn’t recommend that the state government address the underlying problem by amalgamating many of our financially stricken, small regional councils with a view to bringing in improved management, boosting revenue-raising capabilities, and achieving economies of scale. This is what I suggested to Steve Austin on 612 ABC Brisbane back in April 2019. The audio is no longer available, alas, but here’s a chart I posted at the time which illustrates how Queensland has many more small (and arguably financially unviable) councils than NSW and Victoria.
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Amalgamation or un-incorporate and state gov administers like far west NSW.
Aren’t GST relativities meant to even out higher service costs due to low population concentration in different states?
Looks like a podcast topic!
Good points. Definitely a topic for a future chat! Thanks for the comment, Alistair.
Good morning Gene, I read your post re “Qld Audit Office should have recommended council amalgamations” with great interest concluding that your assessment and related post are principally based on economic grounds rather than a holistic strategic assessment of a Councils performance and financial capability? As a former chief administrative officer of a number of LGA’s across both NSW and Qld, forced amalgamations of Council’s isn’t just about $$$’s – it needs to address a broad range of complex number of issues including politics (representation via appropriate divisional representation), efficiency of service delivery, local engagement policies, efficiencies via outsourcing services, addressing social issues and the list goes on!
Does that chart include Queensland’s Indigenous councils? I know lots of them are small and perhaps not “financially viable” in the way that the larger councils are, but I don’t think that’s really the point.
Thanks for the comment Alex. Yes, it does include Indigenous Councils. It’s a fair point you make. Let me unpack the data in a future post. I suspect the Indigenous Councils form a large share of those which are financially distressed but they’re not the only ones.