Before 31 December each year, the Minister for Local Government sets the local council rate cap for the next financial year. The rate cap is the maximum amount a council can increase general rates and municipal charges.
The Essential Services Commission is responsible for administering the Victorian Government’s Fair Go Rates council rate cap system and providing advice to the Minister for Local Government on setting the average rate cap for councils for the forthcoming financial year. This advice is based on analysis of council finances and costs, inflation, and economic forecasts.
In the commission’s latest advice to the minister, we recommended the average rate cap be set equal to the 2022–23 Budget Update forecast of the consumer price index for 2023–24 from the Department of Treasury and Finance (4 per cent).
The commission arrived at this view in consideration of the financial sustainability of the sector, changes in council costs, expectations of future wage rises and recent economic forecasts.
The commission also recommended that a uniform cap continue to apply for all councils in 2023–24. We consider that the higher cap application process remains an efficient, transparent and participative mechanism to manage the varying financial circumstances of individual councils.
Councils that consider the new average rate cap insufficient may choose to apply for a higher cap with the commission. The commission must have regard to a range of matters specified in the Local Government Act 1989 when assessing council applications for higher caps. A key consideration for the commission is whether a council can demonstrate a long-term funding need.
Applications for variations from the rate cap for the 2023–24 financial year must be lodged with the commission by 31 March 2023.
The commission continues to engage with local councils to discuss their obligations under the Fair Go Rates system and the process for 2023-24 higher cap applications.