City of Ballarat Councillors supported the establishment of an inflationary provision to reduce the impact of forecast inflationary pressures at this week’s Council meeting.
Council adopted the City of Ballarat’s four-year budget on 22 June, based on the Australian Government’s Consumer Price Index (CPI) forecasts.
In late July, CPI was reported as 6.1 per cent over the past 12 months – the highest inflation in more than 20 years and much higher than the State Government Cap of 1.75 per cent.
Early modelling indicates inflation could have a net $20 million to $30 million potential impact on the City of Ballarat over the next four years, in areas including capital works, operating costs, interest revenue and interest expenditure.
The inflationary provision will be funded by an estimated $14.135 million positive result from the 2021/22 financial year, compared to forecast. The following shortfalls and additional projects will be funded from the provision:
Wendouree West Community Hub construction – $1.5 million
Her Majesty’s Theatre – $3.637 million (depending on the Council decision in a later report at the same meeting)
Lake Wendouree and Victoria Park Link Lighting project – $370,000 variation
Visiting Friends and Relatives marketing project – $200,000
Extension of the Reusable Cloth Nappy and Reusable Sanitary Products rebate – $30,000
Planned Developer Contribution Plan (DCP) works not completed in 2021/2022 – $2.577 million DCP reserve transfer, for works beyond 2022/2023.
At the meeting, several Councillors spoke about the impact of inflationary financial pressures being felt nation-wide and the potential impact of inflation on the City of Ballarat’s budget.
City of Ballarat Mayor Cr Daniel Moloney said in the past three years City of Ballarat rates have risen by 0 per cent, 1.5 per cent and 1.75 per cent.
“This is consistently well below inflation, meaning we are starting to already see significant pressures on our budget,” he said.
“While the general CPI was 6.1 per cent for the year ending June 2022, it’s three to four times higher than that on construction projects, particularly in regional areas where there’s the perfect storm of labour shortages and high costs of materials.
“Given this situation has become more acute as this year has progressed, it’s important that our expected budget impacts are transparently communicated to ratepayers.
“It’s also important that Councillors and officers have the opportunity to propose timing changes to some projects to allow us to better pace out major projects to remove bottlenecks and hopefully start non-urgent works at a time when some of the inflationary pressures ease.”
Councillor Belinda Coates said it was “prudent financial management” to consider the report and look at creating a buffer in this challenging financial environment.
Cr Coates said both services and infrastructure need to be taken into consideration.
“We have to be responsive and proactive, but also flexible,” she said.
After the above costs are deducted from the $14.135 million, $5,821 million will be left in the inflationary provision. Any remaining funds in the inflationary provision will be used to fund debt repayment.