The Essential Services Commission has released its 2025 Local Government Outcomes Report, which shows most local councils remain in good financial health and ratepayers continue to benefit from council rate caps.
Rate capping is a system that limits the amount Victorian councils can increase their average rates by each year. The Minister for Local Government sets the rate cap, which applies to all councils.
The commission reports on the outcomes of the rate capping system every two years to identify any emerging trends across the local government sector and any other impacts of the caps on the sector.
Over the past four years, the Minister for Local Government set the cap between 1.5 per cent and 3.5 per cent – well below the 6 per cent average rate increases seen before the introduction of rate capping. All 79 local councils kept their rates within these rate caps during the period covered by the report (the commission has since approved two higher rate cap applications for the 2025-26 financial year).
The report shows an increase in the proportion of overdue rates as a percentage of total rates and charges – from 5.7 per cent in 2018-19 to 10.7 per cent in 2024-25.
The report also provides information about councils' service, infrastructure and financial outcomes. Overall, the sector is reporting a tighter financial position than it was during the early years of rate capping, however, low levels of debt and reasonable cash reserves suggest most councils remain financially sound.
Spending on waste management is the fastest growing service area, reflecting changes in the waste market, including the rollout of a four-bin system and increases in the waste levy.
User fees and statutory fines have increased, following a sharp decline in 2019-20 and 2020-21 during the coronavirus pandemic. However, they have not yet returned to 2018-19 levels.
Quotes attributable to Essential Services Commission Chairperson and Commissioner Gerard Brody
"Rate capping is keeping rate increases lower than they have been in the past, which would be a relief for homeowners grappling other cost-of-living pressures."
"The increase in the proportion of overdue rates highlights the importance of councils developing effective financial hardship policies. I'd encourage people struggling to pay their rates to reach out to their council to see what support is available."
"It's encouraging to see councils delivering important services while keeping within the rate cap and maintaining their financial health."
