Council rate cap limits hikes but fees still rising

VICTORIAN council rates will increase by no more than 3 per cent next financial year, aligning with the forecast Consumer Price Index, as part of the state government’s efforts to ease cost of living pressures.

Local government minister Nick Staikos announced the rate cap for 2025-26 under the Labor Government’s Fair Go Rates System, which limits how much councils can raise revenue from general rates and municipal charges.

Rates fund essential services and facilities provided by councils, including local parks, libraries, roads, footpaths, kindergartens, and sporting facilities. Mr Staikos said the cap balances the need for councils to generate revenue while protecting household budgets.

“Fair Go Rates are there so families have certainty over their council rates, and next financial year the increase will again be in line with the inflation rate,” he said.

However, critics argue that councils frequently adopt the maximum allowable rate increase, regardless of whether wages and household incomes are growing at the same pace.

Some councils have been criticised for circumventing the cap by introducing new charges or significantly raising existing fees, adding to household costs despite the cap.

The Essential Services Commission reported that in the 2023-24 financial year, 14 councils introduced new waste service rates or charges, with an average annual increase of 16.7 per cent per rateable property.

The cap, recommended by the Essential Services Commission, aims to keep council rates affordable for Victorians while still allowing councils to maintain services.

Before the introduction of the cap in 2016, rates were increasing by an average of 6 per cent annually. Since then, the average rate cap has been 2.3 per cent.

Councils that require additional funding for critical projects or services can apply for a higher cap through the Essential Services Commission.

“This rate cap will mean local councils are able to raise necessary revenue for the services they provide, without adding cost of living pressure on households,” Mr Staikos said.

For more information on how council rates are set, visit the relevant council website.