Rate capping has ‘limited impacts’ on services

A new report on the outcomes of Victoria’s rate capping system has concluded that it has kept a lid on rate rises without imposing a significant impact on services to ratepayers and asset renewal.

The report, conducted by the state’s Essential Services Commission, found that annual growth in council rates per property slowed significantly since the State Government introduced rate capping in 2016-17.

The Commission’s chair, Ron Ben-David, said that the report shows that, on average, the increase in rates have halved across the state compared to the three years before the introduction of rate capping.

"Our analysis shows the growth in per property rates revenue has fallen from an average of 5.2 per cent per year in the three years prior to rate capping to 2.4 per cent in 2016–17 and 1.9 per cent in 2017–18, roughly in line with the rate caps" he said.

The report also notes that after two years of rate capping:

  • there has been a decline in the growth of rate revenue collected per property, but overall revenue growth has remained relatively stable largely due to population growth

  • rate caps do not appear to have led to a notable increase in waste charges (which do not fall under the rate cap)

  • council spending on capital and services has increased overall.

Dr Ben-David says while rate capping has kept a lid on average rate rises, nearly half of all ratepayers experienced comparatively higher increases in 2016–17 mainly due to property revaluations in that year.

"Because rates are based on property values, increases in individual values that are comparatively higher than average will mean rate increases above the average.

"This affected around 46 per cent of ratepayers in 2016–17 while 39 per cent had lower rates in the same year," he said.

The full report can be found here

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