Rates Out of Control

Everywhere you look at this time of year the media pushes excessive rate increases by councils. Inevitably it is focused on the rate increases exceeding CPI. This identifies that the writer believes that rate increases should be in line with CPI.

This is simply demonstrating a lack of understanding of the nature of CPI and its appropriate use. So I ask those raising this argument….. what is CPI and how does it relate to Council rates?

CPI is a historical measure designed to identify the increase in price of a basket of goods and services that people consume.

The total basket is divided into 11 major groups, each representing a specific set of commodities:

  • Food and non–alcoholic beverages
  • Alcohol and tobacco
  • Clothing and footwear
  • Housing
  • Furnishings, household equipment and services
  • Health
  • Transport
  • Communication
  • Recreation and culture
  • Education
  • Insurance and financial services
None of these goodies feature in the basket of goods and services that impact on Councils. Indeed as an analogy the same can be said for the building industry of which I am a member.

Builders and councils to some degree share a similar basket of goodies in that they consume in reasonable quantities such things as concrete and bitumen, and brick pavers. 

I trust the writers of these articles would not be saying the increase in the cost of housing should be limited to the CPI. We are surely not expecting that builders should adjust their prices to reflect bananas when they are purchasing bricks and timber. 

If this is the case then why do commentators tend always to suggest that Councils should adjust their rates by the CPI. 

Indeed councils have seen (and certainly Unley has) a wage enterprise bargaining over recent years that see their employees wages increase by well over CPI. Wages are a large part of the costs that council endure and this must impact on the rates to be paid by rate payers.

More to the point much of what Council must budget for are projects that, after extensive public consultation, they believe are needed for the betterment of the community. And each year rate payers are given the opportunity to input into the business plan that identifies what projects Council are looking to implement.

Rate payers have the opportunity to suggest which projects the believe are important and which projects should be mothballed.

I await the submissions that Council will receive and if like the last three years I have been involved I do not expect many representations.


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