Partner Institution: University of Technology Sydney, Institute for Public Policy and Governance – Centre for Local Government
The System of Local Government in Australia
Carol Mills, Institute for Public Policy and Governance, University of Technology Sydney
Types of Local Governments
Australia is a federation with three levels of government: the Commonwealth (federal/ national), states and territories; and local government. Local government is established through the separate constitutions of each state and one territory. Therefore, although councils perform similar functions, there are effectively seven different governance systems across the country.
The size of councils in Australia varies dramatically. The largest is Brisbane City Council in Queensland which serves a community of just over one million people, covers an area of 133,809 ha[1] and has an operating budget of over AUD 3 billion.[2] In stark contrast, Sandstone Shire Council, in Western Australia, has a population of 81 residents living in an area covering 3,266,650 ha,[3] comparable to the size of Belgium at 3,300,000 ha.[4] Sandstone’s expenditure in 2020 was AUD 5.6 million.[5]
Reflecting the country’s British administrative heritage, local governments across Australia are typically referred to as a ‘council’, ‘city’ or ‘municipality’, ‘shire’ or ‘town’ depending on factors such as their size, location, or history. ‘County councils’ also exist as incorporations of, and controlled by, two or more local governments; established to deliver services usually across rural areas.
Currently there 537 local governments in Australia. This has been reduced from its peak of 1,000 due to ongoing structural reform aimed primarily at improving efficiency and effectiveness. Reduction has mostly been obtained through the process of amalgamation.
Despite often being strongly resisted by local communities and councils, amalgamations have been a significant policy in most Australian jurisdictions over the last two decades. Opposition to amalgamations has been based on numerous factors, such as concerns about loss of local identity and scepticism about purported efficiency gains. Both arguments were central to opposition to the most recent round of council large scale mergers that took place in New South Wales in 2016. At that time the state government pushed a highly controversial program that was only partially finished, and ultimately abandoned, after community and council resistance derailed the process in a number of locations.
Local government in Australia has traditionally performed a regulatory role, including planning and building approvals, dog and cat management, and food and health inspections. Whilst they tend to have a narrower remit than in many other comparable countries, they also play an important role in community infrastructure such as the provision of local roads and waste management. In recent decades many councils have also extended their economic and community services to include childcare, youth programs, libraries and sport and recreation facilities, and community health activities.
Legal Status of Local Government
Local government is currently not formally recognised in the Australian Constitution. Whilst there has been attempts to amend this, including two referendums, its legal status remains dependent on state legislation. Many of its powers and responsibilities are subordinate to state and national governments, and there is often significant overlap of policy and programs.
These structural arrangements place limits on local government service delivery responsibilities and earnings. Local governments raise revenue from a range of sources including user charges, fines, developer contributions and income from properties, with utilities, waste and recycling services representing the most significant portion of own-revenue raised. However, the only form of tax they can charge is rates. Larger councils have significant income earning capacity and are able to generate around 80 per cent of their income, including waste and recycling charges. In contrast, much smaller councils are increasingly dependent on state and federal government grants.
Commonwealth grants have played a significant role in funding local government since the mid-1970s. However, the historic interpretation of the Australian Constitution was such that funds can only go via the state authorities. In this context, funding from the Commonwealth for local government purposes is ‘tied’, meaning that the state and territories do not have any discretion in how it is to be used. This arrangement was made more complex by a 2009 High Court of Australia decision (Pape v Commissioner of Taxation) regarding the Commonwealth’s powers to authorise one-off payments to taxpayers. That decision was seen by many to limit the Commonwealth’s ability to directly fund local government and remains contentious.
(A)Symmetry of the Local Government System
Australian local governments (councils) are led by elected officials. Generally, elected members act as formal decision-makers for strategic plans, policies and budgets prepared by the executive leadership staff of a council. The nature of these plans is often set out in state and territory legislation.
One form of elected official is the councillor. In addition to their strategic decision-making duties, councillors are also responsible for appointing and overseeing the performance of the general manager/chief executive officer in accordance with an employment contract. This has become a contentious issue in several locations, with some local governments experiencing a high turnover rate amongst their chief executives. This has created numerous concerns, ranging from claims of councillors excessively interfering in operations, to perceived tenure uncertainty making it difficult to attract quality staff.
Another form of elected official is the mayor. The mayor is typically a ceremonial figure and in most cases is chosen from within the cohort of councillors to act on a rotational basis. There are, however, some differences across the country. For example, mayors in Queensland (and now increasingly in other jurisdictions) are mostly directly elected and have wide powers to prepare major policies and budgets.
Voting in local government elections is compulsory in all locations, excluding South Australia, Tasmania and Western Australia. Councillors are usually members of a political party and local government elections are party political, with the major political parties being represented and generally holding a majority. This is particularly the case within metropolitan areas. In fact, local government is often seen as a training ground for political aspirants. In rural areas, candidates are more likely to run independently, although they may be a member of a political party on a personal level.
Political and Social Context in Australia
The geography of Australia, and its cultural, social and economic history, present specific challenges to local government. This has led to councils lacking a uniform capacity to deliver services.
Rural and regional Australia is facing wide-ranging challenges including an ageing local population, poor infrastructure, limited education and employment opportunities, the drift of young people to urban centres, and more. In many rural towns, local councils provide a significant role as a major employer and service provider within the community therefore their sustainability is central to community wellbeing. This is less likely to be the case in a metropolitan location. Therefore, the role of local government within the community varies greatly, depending on a number of external factors.
The Australian Local Government Association (ALGA), the peak body for councils, identified 5 priority areas in its 2020-23 Strategic Plan which provide a useful guide to issues of contemporary importance to the sector. These are: financial sustainability; roads and infrastructure funding; waste; community resilience and climate change.
The Commonwealth has supported local government through a series of grants programs, as previously mentioned. Much of that funding is for infrastructure. For example, the current main initiatives focus on roads (AUD 7.3b between 2000 and 2019) and regional and community infrastructure. However, in 2016 the total value of Commonwealth grants equated to just 7 per cent of the amount spent by local government nationally. In its 2019 national election proposals, ALGA called for further funding for these programs in addition to health and wellbeing, digital, and Indigenous community funding.
References to Scientific and Non-Scientific Publications
Australian Local Government Association, ‘Local Government Key Facts and Figures’ (Australian Local Government Association, 2018) <https://alga.asn.au/facts-and-figures/>
Dollery B and Grant B, ‘Economic Efficiency Versus Local Democracy? An Evaluation of Structural Change and Local Democracy in Australian Local Government’ (2010) 23 Journal of Interdisciplinary Economics 1 <https://doi.org/10.1177/02601079X11002300102>
Grant B and Drew J, Local Government in Australia: History, Theory and Public Policy (Springer Palgrave 2017)
Hastings C and others, ‘Community Expectations for the Role of Local Government in Regional Australia: Meeting the Challenges of ‘Slow Burn’ (2016) 22 Australasian Journal of Regional Studies 158
Larcombe F, The Advancement of Local Government in New South Wales: 1906 to the Present (vol 3, Sydney University Press 1978)
Ng Y and others, ‘Democratic Representation and The Property Franchise In Australian Local Government’ (2017) 76 Australian Journal of Public Administration 221 <https://doi.org/10.1111/1467-8500.12217>
Office of Local Government, ‘Standard Contracts of Employment’ (NSW Government, undated) <https://www.olg.nsw.gov.au/strengthening-local-government/supporting-and-advising-councils/directory-of-policy-advice/employment-contracts>
Sellers J and others, Inequality and Governance in the Metropolis (Palgrave 2017)
Spearritt P, Sydney’s Century (UNSW Press 2000)
Stilwell F and Troy P, ‘Multilevel Governance and Urban Development in Australia’ (2000) 37 Urban Studies 909 <https://doi.org/10.1080/00420980050011154>
UTS IPPG, ‘Why Local Government Matters’ (UTS, undated) <https://www.uts.edu.au/research-and-teaching/our-research/institute-public-policy-and-governance/about-institute/acelg/why-local-government>
[1] Information retrieved from the Australian Bureau of Statistics (2019).
[2] Information retrieved from Brisbane City Council (2020).
[3] Information retrieved from the Australian Bureau of Statistics (2019).
[4] Information retrieved from World Bank (2015).
[5] Information retrieved from Shire of Sandstone (2020).
Local Responsibilities and Public Services in Australia: An Introduction
Carol Mills, Institute for Public Policy and Governance, University of Technology Sydney
The changing demands on Australian local governments has seen them progressively evolve over time. What was once viewed as a sector narrowly focused on ‘services and property’, is now far wider reaching. Promotion of social, economical, environmental and cultural wellbeing of the communities they govern is now seen as the delivery of core purpose. This has been a response to rising citizen expectations of public services and the devolution of service delivery tasks from higher levels of government to local governments.
Concurrently, local government services have become subject to increased regulatory requirements from other levels of government, particularly in core areas such as asset management, land use planning, and community and strategic planning. The costs of providing and maintaining services have also increased faster than revenue. The net effect has been that local governments now provide a wider range and higher standard of services, such as sporting, cultural and community care facilities, under increasing regulatory and financial constraints.
Recently, attempts have been made to understand and articulate this expanded and more complex service delivery task for contemporary local governments (see table below).
Table 1: Illustrating the expanding role of local governments in services.
| Economic and community development | Operation of tourist centres and facilities
Provision of grants to local groups to provide services Events and promotions |
| Sustainable land use | Development approvals
Building approval and certification Management of public land |
| Protecting the environment | Preventing pollution or restoring degraded environments
Providing environmental programs Strategic planning |
| Community services | Library services
Community events Aged care Early childhood education and care |
| Public health and safety | Waste collection and management
Water and sewerage services Preparedness and response to natural disasters |
When considering the evolving nature of local government service delivery, several functions may be distinguished:
‘Core’ local government functions: Whilst core functions differ across jurisdictions, there is an expectation that local governments provide core services to a minimum standard before others are considered. Examples of these include building approval and certification, waste collection and management, and cultural and recreation services.
Services delivered in competition with other providers: For a range of reasons, local governments have chosen to deliver services in competition with other providers. Examples include childcare and commercial car parks. These activities can also generate new revenue sources.
‘Market gap’ services: Particularly in rural areas, local governments often face pressure to provide services that are not economically viable. This viability, or lack thereof, is commonly due to small population numbers and few-to-none alternative providers. Examples include medical clinics, airports, produce saleyards, abattoirs and cemeteries.
References to Scientific and Non-Scientific Publications
Grant B and Drew J, Local Government in Australia: History, Theory and Public Policy (Springer Palgrave 2017)
Independent Local Government Review Panel, ‘Service Delivery and Infrastructure: Background Paper’ (Report prepared for the NSW Government, 2012)
O’Connor J, The Fiscal Crisis of the State (Routledge 2017)
Local Financial Arrangements in Australia: An Introduction
Carol Mills, Institute for Public Policy and Governance, University of Technology Sydney
In Australia, the national government collects the majority of tax revenue (over 70 per cent) through mechanisms such as Income and Goods and Service Taxes (GST), despite being responsible for less than half (about 40 per cent) of all public sector expenditure on service delivery. This is a relatively new proportion of tax collection, as prior to the introduction of GST in July 2000, states also collected a number of taxes and duties. These were largely replaced by the GST and a redistributive process was established to allocate national revenue to the other layers of government and across jurisdictions. There are many critics of this model at the state and local government levels. Nationally, local government collects about 3 per cent of all tax revenues and is responsible for about 6 per cent of total public sector expenditure on service delivery.
The single main source of revenue for local government is property rates. In 2018, they accounted for about 40 per cent of the total AUD 17 billion revenue collected by councils nationally. Other local government revenue sources include fees and charges (such as for water, waste and recycling service, parking, lodging development applications, or use of facilities like swimming pools), and rental income from owned assets.
Local government revenues vary substantially across Australia. This is due to property rates being the main revenue source, and state governments using different methods to value the land on which property rates are based. For example, South Australian local governments collect 60 per cent of their revenue from rates, compared with around 15 per cent for the Northern Territory. Total own-source revenue (such as rates and services charges) can comprise up to 85 per cent of a local government’s revenue. This is lower in rural areas where land values tend to be lower and there are more sparsely populated areas. Rural and regional local governments can collect as little as 20 per cent of their expenditure and also face significant diseconomies of scale in terms of the costs of providing services. As a result, many rural councils, are reliant on grants from other levels of government such as through the annual Financial Assistance Grants system.
A range of criteria is used to determine the Financial Assistance Grant amounts and the formula is often the subject of intergovernmental conflict. It is strongly argued that the needs of regional and remote local governments are inadequately reflected in these formulas, and there is limited capacity to lobby for change due to the structure of the local government associations representation arrangements.
The main expenditure items of local governments are housing and community amenities (24 per cent), transport and communication (22.5 per cent) and general public services (17.2 per cent). These figures vary depending on the different responsibilities of local governments in each state and territory and particularly whether they are metropolitan or rural councils.
References to Scientific and Non-Scientific Publications
Australian Local Government Association, ‘Local Government Key Facts and Figures’ (Australian Local Government Association, 2018) <https://alga.asn.au/facts-and-figures/>
Charbit C, Linking Regions and Central Governments: Contracts for Regional Development (OECD Publishing 2006)
Independent Pricing and Regulatory Tribunal, ‘Comparative Analysis of Local Government Revenue and Expenditure In Australia’ (NSW Government 2009)
Phillimore J and Fenna A, ‘Intergovernmental Councils and Centralization in Australian Federalism’ (2017) 27 Regional and Federal Studies 597 <https://doi.org/10.1080/13597566.2017.1389723>
Productivity Commission, ‘Productivity Review Supplementary Paper No. 16 – Local Government’ (Commonwealth of Australia 2017)
Spearritt P, Sydney’s Century (UNSW Press 2000) <https://doi.org/10.1111/1467-8500.001>
The Structure of Local Government in Australia: An Introduction
Carol Mills, Institute for Public Policy and Governance, University of Technology Sydney
Reforms to Australia’s local government systems over recent decades have often focused on structural change, particularly around increasing scale. For example, in the 1990s, the Victorian Government dismissed all local governments in order to redraw boundaries and drastically reduce the number of councils. It was then voted out of office as voter discontent with the swiftness of these and other dramatic reforms became a major state election issue. Similarly, in 2008, the Queensland Government halved the number of local governments and a small number of the amalgamated councils have since demerged. In 2015-16, the New South Wales Government sought to reduce the number of local governments but the reform process remained incomplete. It was abruptly halted due to a mix of local community discontent (although the amalgamations in metropolitan areas were largely supported by the wider community), a change of state political leadership, and court challenges by a small number of local governments faced with merger. Despite these challenges in May 2019, 42 councils in NSW were merged into 19 organisations.
The driving force behind these moves to structural reform has largely been ideological, the notion being that smaller local governments are less efficient. While all local government reform to date has been ‘done to’ local government, it is interesting to note the reluctance or perhaps inability for significant self-initiated reform by the sector. Despite advanced financial modelling and optimistic projections, there is currently no Australian evidence to support the claims that larger local governments are necessarily more efficient. This is a topic currently being explored by the Institute for Public Policy and Governance of the University of Technology Sydney. There is more evidence that larger local governments can promote strengthened strategic leadership capacity but this has been difficult to measure and warrants further research.
It is important to note that not all of Australia’s territory is covered by local government. Some remote ‘unincorporated’ areas are administered by state and territory governments, and the Australian Capital Territory – the home of Australia’s national capital – does not have a formal system of local government and local services are delivered by the Territory Government.
As for cooperation between local governments, councils in most jurisdictions form regional governance collaborative structures, either voluntarily or through incentivisation. These generally come together on a sub-regional scale to share service delivery, for advocacy or strategic planning. In 2017 legislation was introduced in New South Wales (NSW) for Joint Organisations of councils in non-metropolitan areas, facilitating the establishment of regional strategic priorities, regional leadership and intergovernmental cooperation.
References to Scientific and Non-Scientific Publications
Burdess N and O’Toole K, ‘Elections And Representation in Local Government: A Victorian Case Study’ (2004) 63 Australian Journal of Public Administration 66 <https://doi.org/10.1111/j.1467-8500.2004.00379.x>
Drew J, Kortt MA and Dollery B, ‘Economies of Scale and Local Government Expenditure: Evidence From Australia’ (2014) 46 Administration & Society 632 <https://doi.org/10.1177/0095399712469191>
Independent Local Government Review Panel, ‘Service Delivery and Infrastructure: Background Paper’ (Report prepared for the NSW Government, 2012)
UTS IPPG, ‘Why Local Government Matters’ (UTS) <https://www.uts.edu.au/research-and-teaching/our-research/institute-public-policy-and-governance/about-institute/acelg/why-local-government>
Intergovernmental Relations of Local Governments in Australia: An Introduction
Carol Mills, Institute for Public Policy and Governance, University of Technology Sydney
From 1992 to 2020, local governments were represented at Australia’s chief intergovernmental forum, the Council of Australian Governments (COAG), through the Australian Local Government Association (ALGA).
COAG was established to improve and promote intergovernmental arrangements. It sought to ensure co-operation between all levels of government and increase structural efficiency. It also aimed to find ways to enhance accountability, as service delivery in Australia is often poorly delineated between different levels of government. COAG focused on key policy reforms of national significance, such as the National Competition Policy.
ALGA is the peak body of state local government associations. It advocates on behalf of its members and has historically represented local government at a range of national government committees and forums. ALGA’s board is made up of 2 representatives of each state association plus an independent chair. ALGA was a member of COAG, together with the Australian Government, the governments of the six states and two mainland territories.
When created, COAG replaced Premiers’ Conferences and, progressively, a large number of Ministerial Councils including the Council on Local Government. Through ALGA, local government had observer status at some of these meetings, but formal membership was normally restricted to state and federal government representatives.
On 29 May 2020, in response to the crisis brought about by the Covid-19 pandemic, the Australian Prime Minister announced the establishment a National Cabinet to replace COAG. The National Cabinet is now the country’s chief inter-governmental decision-making body. It comprises the Premiers and Chief Ministers of the eight states and territories and the Prime Minister. ALGA, and by extension local government, is not a member of this Cabinet. Within this new institutional landscape, the Commonwealth may be more inclined to leave local government issues to the states, and state governments might become more centralist, increasing their control over local governments. This is a particular risk during and post-Covid where state and local government revenue bases have been much reduced and many local governments will likely not be financially viable without increased state support.
In this context, and during a time of major change, ALGA found itself potentially marginalised and expressed concern that the voice of local government would not be heard. While there have been calls for a decision about appropriate governance arrangements remain, the current question is how local government should position itself within this evolving institutional context.
References to Scientific and Non-Scientific Publications
Phillimore J and Fenna A, ‘Intergovernmental Councils and Centralization in Australian Federalism’ (2017) 27 Regional and Federal Studies 597 <https://doi.org/10.1080/13597566.2017.1389723>
People’s Participation in Local Decision-Making in Australia: An Introduction
Carol Mills, Institute for Public Policy and Governance, University of Technology Sydney
There are increasing efforts across local government in Australia to directly involve residents in local decision-making. This could be undertaken through a range of consultative and deliberative processes, particularly with regard to determining budget allocations, service levels and long-term community strategic planning. In many cases consultation is required under legislation and a recent survey of councils in Victoria and New South Wales revealed that, for many, consultation was still seen as primarily a compliance activity. However, practice is gradually changing and more councils are building the capacity to conduct meaningful engagement with their communities on a range of issues.
For example, community satisfaction surveys have become a common tool to ascertain what residents expect in terms of service delivery and performance. These surveys vary in their implementation but in general they target service users through feedback surveys. In addition, councils may carry other activities to canvas the community’s thoughts, such as setting up stalls in shopping centres or engaging external agencies to carry out wider resident surveys. This has helped local governments to identify gaps between expectations and performance and by highlighting where performance improvement is needed. Increasingly, the findings of these surveys form the basis of local government annual reports and are being fed into the major whole-of-organisation service delivery review processes. These reviews, in varying forms, are generally required by the various Acts which govern local government across Australia.
Other engagement mechanisms are also increasingly used including focus groups and deliberative tools such as citizen’s juries. For example, from August to November 2019, the City of Sydney in NSW convened a citizens jury of 50 members of the community. The jury considered, and made recommendations on, concepts that should be introduced by 2050 in order to facilitate the realisation of the communities’ vision for the city. This included strategic objectives such as the improved involvement and representation of the First Peoples of Australia in community decision-making.
For many small councils, capability and resource limitations are impacting on their ability to actively engage their communities and further innovation is required.
References to Scientific and Non-Scientific Publications
Christensen H and McQuestin, ‘Community Engagement in Australian Local Governments: A Closer Look and Strategic Implications’ (2019) 45 Local Government Studies 453
Independent Local Government Review Panel, ‘Service Delivery and Infrastructure: Background Paper’ (Report prepared for the NSW Government, 2012)
James O, ‘Managing Citizens’ Expectations Of Public Service Performance: Evidence from Observation and Experimentation in Local Government’ (2001) 89 Public Administration 1419 <https://doi.org/10.1111/j.1467-9299.2011.01962.x>
Morton Consulting, ‘Local Government Association of Queensland (LGAQ) 2013 Community Satisfaction Tracking Study’ (prepared for LGAQ, 2014)
Ryan R and Hunting S, Service Delivery Review: A How to Manual for Local Government (2nd edn, Australian Centre of Excellence for Local Government, University of Technology Sydney 2015)
Watt PA, ‘Principles and Theories of Local Government’ (2006) 26 Economic Affairs 4 <https://doi.org/10.1111/j.1468-0270.2006.00605.x>
