Financial Sustainability

Restoring Financial Assistance Grants to one per cent

Restoring federal Financial Assistance Grants to at least one per cent of Commonwealth taxation revenue is ALGA’s number one priority.

These grants are vital to the continued economic prosperity of communities in every corner of our nation. Research produced for ALGA by AEC shows that these grants make up more than 20 percent of annual operating revenue for around one in four councils, and this figure is much higher in regional, rural and remote areas.

Since 1996 the value of Financial Assistance Grants as a percentage of Commonwealth taxation revenue has steadily declined from one percent to just half a percent today.

The Albanese Government took a commitment to the 2022 federal election to provide “fair increases” to Financial Assistance Grants, but as of May 2024 are yet to deliver on this promise.

According to research from SGS Economics and Planning, over the past decade total expenditure per capita by local government has essentially flatlined, as expectations for public services have continued to grow. The research also shows outlays per capita from the Commonwealth have risen sharply over this period, while those of state and territory governments have steadily grown.

The SGS research also shows that local government supports increased productivity in at least nine different ways, including providing urban infrastructure, mitigating externalities in urban development, place making and the visitor economy, providing land for housing, better local labour markets, climate mitigation and adaptation, providing land for business, business clusters and innovation, and the circular economy.

Australian local government funding is low by international standards.  Allowing for the differing scope of local government around the world, by removing the provision of health, education and social services, Australian councils’ share of GDP ranks amongst the very lowest of comparator nations.

Federal Local Government Minister the Hon Kristy McBain MP highlighted the importance of Financial Assistance Grants in a speech to Parliament in November 2022, saying: “We know this untied funding enables local governments to deliver their community priorities and enables the best placed solutions to come through.”

However, since being elected in 2022 the Government’s only increases have been annual indexation, in-line with the Local Government (Financial Assistance) Act.

As Australians continue to experience a cost of-living crisis, local governments are providing relief through a wide range of free and low-cost facilities, services, events and programs.

A substantial increase to Financial Assistance Grants would support local governments to improve and expand on this work, providing much needed relief to all Australians.