8 December 2005

Reserve Bank Official Cash Rate (Ocr) Increase Will Mean Council Rate Increases Next Year

Statement from Association Chairman, David Thornton

The latest rate increase by Alan Bollard will flow through all sectors of the economy and will add significantly to local government costs.

This will mean bad news for ratepayers next year.

Local council rates have, in recent years, been increasing at about twice the inflation rate - partly to pay for additional spending and partly to reflect inflation.

And there is worse to come.

Early next year councils will be producing 10- year plans which will reveal huge increases in expenditure - especially on basic infrastructure such as roads, sewerage systems, and fresh water supply -plus, in Auckland at least, public transport.

This expenditure will ultimately be funded from rates - to meet the costs of interest and capital repayments.

Rates are a tax - a form of wealth tax based, for the most part, on the estimated value of the family home.

Rates take no cognisance of income or ability to pay. Nor do they accurately reflect the value of services supplied to individual households.

A Government-appointed 'task force' of bureaucrats is supposedly working on finding alternative funding sources.

Judging from an earlier Treasury report the work being done by the task force is in fact to find additional funding sources.

Such an approach can only result in councils actually increasing their spending - rather than undertaking a fundamental appraisal of what local councils should and should not do and who should pay for it.

[A final report from the task force will be released either late this month or early in the New Year].

ENDS

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