Property boom no windfall for local government: report
See also: 2006 Regional Co-operation and Development Forum
November 27, 2006
Australia's property and land boom is not the rates income windfall for local government that many commentators believe, a new national report says.
Details are contained in the Australian Local Government's State of the Regions 2006-07 Report.
Top research group, National Economics, prepared the comprehensive 158-page report. It covers the state of play in all of Australia's 64 local government regions.
The report, sponsored by the Jardine Lloyd Thompson insurance group, says that in the period under review residential land value soared by 268 per cent above the general inflation rate. The value of dwellings rose by 172 per cent.
It discusses crises in housing affordability and consumer over-indebtedness following the boom.
More insidiously, there is concern about an increase in the cost base of land-intensive industry, agriculture in particular.
National Economics points out that the pattern of private investment in the Australian economy has been distorted as a result of the land boom because investors have been looking for high profits from land speculation.
Distracted by the hope of quick speculative returns, Australia has not been investing for the long-term future.
To make matters worse, higher commercial and rural land prices spilling over from the residential boom have increased the cost base in trade-exposed industries without any relief from increased product prices, thus worsening the squeeze on profits.
The report says that efforts by local government to raise money through rates based on land values are limited by the ability of cash-strapped businesses and mortgage burdened home-buyers to pay.
The ALGA has commissioned a major study of local government financing from PricewaterhouseCoopers. It will assess the current and long-term financial sustainability of the local government sector.
The study is expected to strengthen local government's case for fair funding from the federal government and the states.
» 2006-07 State of the Regions report
- Contact
- Amanda Lynch, Director, ALGA Public Affairs - 0419 123 862
- Michael Spencer, National Economics - 0419 123862
