Thursday, 4 December 2025

 Bev McARTHUR (Western Victoria) (23:34): (2218) My adjournment matter is for the Minister for Local Government, and the action I seek is that the minister take immediate action to address concerning trends outlined in the Victorian Auditor-General’s report into the financial management of local councils. The Victorian Auditor-General’s Office (VAGO) found that its audited councils are generally committed to conservative financial settings and responsible budgeting, meeting their immediate obligations and carrying low levels of debt. However, the future is less certain given that a number of key short- and medium-term financial indicators are failing.

Take net result ratio, a measure of profitability. It fell from 16 per cent to 12 per cent between 2016–‍17 and 2022–23. Then there is net operating cash flow, which was lower in 2023–24 compared to 2015–‍16 for all cohorts except for interface councils. The same can be said of the sector’s working capital ratio, which has fallen since 2018–19. If the last two measures are not improved, councils may fail to meet their short-term obligations if they do not have the liquid assets or cash that they need when they need it. I am most concerned for the 19 small shires in this state which have limited revenue bases due to their small populations and limited options to raise revenue outside rate rises. While councils should always lift their game, the main problem is state coercion rather than council mismanagement.

The inquiry into local government funding and services found that the trend of deteriorating financial sustainability across all council types is predicted to continue over the next five to 10 years, at least in part due to cost shifting. Local government is absorbing many shared state services, from libraries to kindergartens, immunisation and the maintenance of state assets without matching contributions from the state. VAGO also notes that because Victorian local government grants do not provide advance payments of financial assistance grants, in 2023–24 audited councils were forced to spend down cash reserves to supplement capital works programs.

Minister, follow the lead of New South Wales by publishing annual reports that quantify cost shifting in this state so that Victorians know the true extent of the problem. Work with councils to ensure fair funding for shared services or at least stop coercing them into services that you know cannot be sustainably delivered. Local government is closest to the community, but their ratepayers cannot carry the state’s financial burdens.