The financial sustainability of local governments across Australia continues to be a challenge with increasing community demand for services, population growth and rising costs associated with maintenance and renewal of ageing infrastructure.

In February 2020, the Queensland Audit Office (QAO) reported to parliament that over half of Queensland councils spend more than they earn. Additionally, in March 2020 the NSW Auditor-General reported that while most NSW councils meet the prescribed benchmarks for liquidity and working capital, in 2018 – 19 more councils reported negative operating performance compared with the prior year.

In Victoria, councils have had to adjust to rate capping introduced in 2016 which restricts the amount that councils can raise their rates each year.

More than half of the councils continue to spend more delivering services to their community than they receive in revenue from rates, fees and charges, and grants.

(QAO Report 13: 2019 – 20)

Over the coming months, councillors and council executives will finalise their 2020-21 budgets and consider the long term financial strategies for their respective communities.

This year's budget will be heavily impacted by the challenges associated with COVID-19, factoring in the new different ways of working, greater reliance on technology given the social distancing restrictions, and providing assistance and support to the community as they deal with tougher economic conditions.

In this report, KPMG provides a roadmap for local governments which will assist to guide long term financial planning.

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