Productivity Commission delivers fresh blow to antiquated rate peg

NSW’s antiquated rate pegging system has been dealt another blow this week, after the Productivity Commission found the practice was holding the state back.

The Commission’s review of infrastructure contributions found rate pegging was “a disincentive to development and growth”, and that NSW lagged significantly behind other states when it came to the provision of vital local community infrastructure.

Local Government NSW (LGNSW) President Linda Scott said the report found average NSW council rates stood at $591 per capita in 2019, compared to an $835 average for all other states.

“This means our communities right across NSW are missing out on good local roads, footpaths, sports facilities, parks, and all the other infrastructure and service components they need,” Cr Scott said.

“If councils have insufficient funding to keep local infrastructure such as roads in shape, we all suffer – through increased congestion, lower productivity and a worse quality of life for everyone.

“The Productivity Commission is just the latest to join LGNSW and a wide range of bodies disturbed at the choke-hold this practice has on our standard of living.”

Bodies who have called for the outdated rate peg to be scrapped include NSW TCorp, the Planning Institute of Australia, the Committee for Sydney, the Sydney Business Chamber and the Western Sydney Business Chamber.

“We are staring down the barrel of a prolonged economic recovery period, with the extent of the financial carnage inflicted by the COVID pandemic still to be fully realised, Cr Scott said.

“Councils are in pole position to drive a locally-led recovery, and yet many councils are facing a financial crisis as they try to provide and maintain infrastructure and services to their communities.

“The NSW Productivity Commission is right to say we cannot miss this opportunity, and LGNSW continues to advocate strongly for reform that will build a fair, financially sustainable way to fund the community infrastructure and services our communities need and deserve.”

The Commission’s Review said rate pegging forced councils to reduce the quality and quantity of infrastructure to service their communities or recover the cost from infrastructure contributions.

Yet developer contributions currently covered “cover only a small proportion of the required funding and fail to deliver services in a timely and coordinated way”, the Review found.

Cr Scott said the Productivity Commission had cut to the heart of the growing and cumulative financial crisis facing councils.

But she said reform needed to go further than simply “streamlining” the developer contribution system.

“There’s no use attracting tens of millions of dollars of developer investment in the community through changes to the system if councils are left having to build supporting footpaths, parks and roads without enough money to do so,” she said.

“We are on the same page when it comes to supporting economic growth, and we look forward to working with the Government and its agencies to deliver that growth through effective services and infrastructure which underpins our quality of life.”

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