Projects
Local government productivity report

Local government plays an indispensable role in the productivity of Australia's economy.

In 2022, the Australian Local Government Association (ALGA) provided a submission on behalf of Australia’s 537 local governments to the Productivity Commission’s Productivity Inquiry. Included in the submission was an SGS report highlighting how councils support and boost national productivity and the issues constraining local government from delivering further productivity gains. The report addresses two inter-related but distinct questions:

1. What is the productivity of local government as a service provider, and what is the scope for improvement?
2. What contribution does local government make to the productivity of other sectors in the economy, and what is the scope for improvement?

Some key findings in the report:

• Over the past decade, total expenditure per capita by local government has more or less flatlined. This is despite a period of rapid population growth and escalating demand for volume, quality and reliability in public services. Meanwhile, outlays per capita by the Commonwealth have escalated sharply, and those of state and territory governments have grown steadily.
• By international standards, investment in Australian local governments is small, forcing councils to operate with very modest resources. Allowing for the differing scope of local government across nations, Australian local governments’ share of GDP ranks amongst the very lowest of comparator nations.
• Local government directly impacts broader economic productivity in at least nine ways: providing urban infrastructure, mitigating externalities in urban development, placemaking and visitor economy, providing land for housing, better local labour markets, climate mitigation and adaptation, providing land for business, business clusters and innovation, and circular economy.
• Local government is held back by poor state and Commonwealth policy settings, including cost shifting, inadequate fiscal equalisation, and in some jurisdictions rate capping or rate pegging.
• The financial challenges many councils are consequently experiencing are impacting their capacity to adequately maintain their local assets, attract and retain qualified staff, and undertake digital transformation initiatives.