Financial Sustainability

financial sustainability

Councils are increasingly expected to do more with less.

The Challenge

  • Rates alone no longer cover the cost of maintaining essential infrastructure and delivering community services.
  • A portion of Hunter councils rely on grants for up to 60% of their revenue.
  • Councils are becoming increasingly dependent on short-term, competitive grant funding to deliver critical infrastructure.
  • Competitive grants create uncertainty and a significant administrative burden.
  • Smaller regional councils are often disadvantaged by:
    • Limited capacity to prepare competitive applications
    • Co-contribution requirements
    • Cash flow constraints where grants are paid in arrears
  • The result is fragmented investment, making it harder for councils to plan and deliver long-term infrastructure that meets local priorities.

 

The Funding Inequities

  • The Commonwealth collects around 80% of Australia’s taxation revenue (ABS, 2025).
  • Local government receives just 0.49% of Commonwealth taxation revenue.
  • Yet councils manage around one-third of Australia’s public infrastructure assets.
  • Councils also maintain more than 75% of Australia’s road network.
  • According to independent consultants Morrison Low, nearly $500 per year from every NSW ratepayer is effectively diverted to fund responsibilities that belong to higher levels of government.
  • The funding simply doesn’t match the responsibility.

 

Key Parliamentary Inquiries

The need for reform has been recognised by both State and Federal parliamentary inquiries.

NSW Government

  • Standing Committee on State Development – Inquiry into the Ability of Local Governments to Fund Infrastructure and Services (Report 52, November 2024)
  • NSW Government Response (May 2025)

 

Australian Government

  • House of Representatives Standing Committee on Regional Development, Infrastructure and Transport – Inquiry into Local Government Sustainability (March 2024)
  • Interim Report into Local Government Sustainability (February 2025)
  • Inquiry into Local Government Funding and Financial Sustainability (2026)

The consistent findings across these inquiries demonstrate that local government financial sustainability is a national issue requiring coordinated action from all levels of government.

 

Our Advocacy

In May 2026, Hunter Joint Organisation appeared before the House of Representatives Standing Committee on Regional Development, Infrastructure and Transport as part of the Federal Inquiry into Local Government Funding and Financial Sustainability.

In our submission, we advocated for funding arrangements that better reflect the realities facing regional councils, including maintaining ageing infrastructure, supporting growing communities, responding to disasters and delivering increasing levels of service.

We continue to advocate for:

  • Practical action to address cost shifting.
  • A review of the NSW Financial Assistance Grants distribution methodology to provide greater equity for councils in need.
  • A review of road funding allocation models to better reflect infrastructure needs.
  • IPART rate-pegging that better aligns with the actual cost drivers experienced by councils.
  • Streamlined disaster recovery funding and ongoing betterment programs to build council and community resilience.
  • Risk-based compliance and improvements to audit processes to reduce administrative burden.
  • Returning a greater percentage of the Waste Levy to councils to support waste and circular economy initiatives.
  • Long-term, non-competitive co-investment to address infrastructure backlogs and renew community assets.
  • Four-year block grant funding aligned with councils’ Integrated Planning and Reporting cycles.

 

Recent Progress

The 2026–27 NSW Budget included an important reform, with the NSW Government committing $470.1 million over ten years to assume responsibility for the NSW Rural Fire Service fleet.

This addresses one of the most significant examples of cost shifting by ensuring the organisation operating the fleet also own and funds it.

The reform is expected to reduce local government depreciation costs by around $145 million each year across NSW, allowing councils to redirect funding towards local infrastructure and community services.

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