Media Release: Feds Melt the FAGs Indexation Freeze

9 May 2017

The local government sector has welcomed the 2017/18 Federal Budget announcement that the Australian Government would end the indexation freeze on Financial Assistance Grants (FAGs).

The Budget Papers released tonight confirmed the grants – a critical source of funding for local government – would again be indexed to keep up with inflation, LGNSW President Keith Rhoades said.

“These untied grants are a vital part of local government’s revenue base, allowing the provision and maintenance of community infrastructure such as local roads, parks, swimming pools and libraries,” Clr Rhoades said.

“They are particularly critical to those councils who don’t have the rating base or other revenue sources to fill the gaps.

“The three-year freeze has had a harsh impact on NSW councils – since the freeze was imposed by the Abbott Government in 2014, NSW councils have missed out on up to $300 million.

“Unfortunately despite this welcome restoration, the freeze has resulted in a permanent base reduction of around 13 per cent.”

Clr Rhoades said the freeze had been particularly tough on NSW councils, which were being squeezed from all sides by rate-capping and cost-shifting by both the State and Federal Governments valued at well over $600 million per annum.

“It’s exactly these sort of financial constraints that make it almost impossible for councils to get ahead,” Clr Rhoades said.

“The significant financial losses sustained as a result of the FAGs indexation freeze cannot help but impact on the quality of local services and infrastructure councils currently provide.”

Other Budget positives for the sector included the foreshadowed extension of the Roads to Recovery (R2R) Program beyond the original cut-off date of 2018-19 to 2020-21.

Program funding is $700 million for 2017/18, $364.5 million in 2018/19, and increases to just below $400 million in 2019/20 in line with  the Government promise to boost funding for this program by $50 million per annum from 2019/20.

Black Spots Funding is budgeted to be $85 million per annum until 2019/20, after which it will revert to $60 million in 2020/21. This is a net increase of $40million over the forward estimates to 2020/21 (after an underspend of $35million in 2016/17).

“This is very welcome recognition of the dire state of many roads across the nation,” Clr Rhoades said.

“But it is important to note the delay before the additional funding kicks in, as well as the fact that the funding boost is spread nationally.

“It’s sobering to think that even if the entire $50 million was invested in NSW, it would still be insufficient to bring thousands of kilometres of particularly country roads up to the standard our communities need and deserve.”

Clr Rhoades also welcomed the Federal Government’s announcement of an additional $8.4 billion in new equity funding for the Australian Rail Track Corporation (ARTC) to deliver the Melbourne to Brisbane Inland Rail project. He said this major project had the potential to offer real economic development opportunities for rural and regional communities

Media Enquiries

LGNSW President, Cr Keith Rhoades: 0408 256 405
Media, Toni Allan: 0412 774 441