Councils urge federal funding reform as inquiry hears South Australia’s concerns

LGA presented to the Standing Committee on Regional Development, Infrastructure and Transport’s Inquiry into Local Government Funding and Fiscal Sustainability on Tuesday, before several regional councils and associations appeared before the Committee in Port Lincoln on Wednesday.

The inquiry examines the financial relationship between local and other levels of government, with a focus on funding mechanisms and the long-term financial sustainability of councils.

LGA Chief Executive Officer Victoria MacKirdy said councils right across the state were dealing with budgetary pressures driven by rising costs of materials and labour, which are further compounded by Financial Assistance Grants being halved over the past 30 years.

“Nearly three quarters of council CEOs have identified financial sustainability as the number one risk to the local government sector in South Australia, and it’s a sentiment reflected by local governments all around the country,” Ms MacKirdy said.

“Councils are being asked to do more, while the cost of delivering essential infrastructure and services continues to rise. This is especially felt in the regions, where councils with small ratepayer bases are struggling to maintain vast road networks.

“One South Australian council, for example, told us that resurfacing one kilometre of road cost $257,000 in 2018. Last year, the same treatment cost around $526,000 – more than twice as much.

“In 2024-25, nearly 70 percent of the revenue raised by councils in South Australia was through rates, demonstrating the high reliance on this form of tax.

“This isn’t sustainable, especially as businesses, families and singles are already grappling with cost-of-living pressures, rising interest rates and higher rent.

“The inquiry was a welcome opportunity for our sector to put forward why current funding models aren’t keeping pace, and what needs to change for our councils to continue funding the critical infrastructure and services communities rely on every day.”

Represented by LGA’s Metropolitan Committee Chair Mayor Moira Were on the day, LGA highlighted the need for:

• Financial Assistance Grants to be restored to 1 per cent of Commonwealth taxation revenue
• a review of Financial Assistance Grants indexation to ensure funding better reflects councils’ actual cost pressures
• councils to be appropriately funded and resourced when taking on new responsibilities
• a shift away from short-term, tied and competitive grants towards sustainable, untied funding
• reform of federal road funding arrangements to address South Australia’s long-standing disadvantage.

Ms MacKirdy said without an increase in untied federal grants, many councils will struggle to renew existing, depreciating assets and continue delivering the services their communities need and want.

“This is not just about money – it’s about making sure communities have the roads, footpaths, libraries, sporting facilities and other infrastructure they need, whether they live in the city or country,” Ms MacKirdy said.

“The federal government should be investing in local infrastructure, local economics and local communities, as they all underpin Australia’s prosperity.”

You can read LGA’s full submission to the Inquiry, lodged earlier this year, on the LGA website.

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