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Thursday, 1 June 2000
Page: 16917

Mr ANDREN (11:04 AM) —From 1 July, the Commonwealth will cease paying financial assistance grants to the states and will replace them with revenue from the goods and services tax. Thus the link between local government assistance and general revenue assistance to the states will be severed, and hence the need for the Local Government (Financial Assistance) Amendment Bill 2000. The Commonwealth originally wanted the states to take over the responsibility of funding local government. But, given the lack of trust that local governments hold for state administrations, that was never going to work. Local governments opposed the transferring of responsibility for funding from the Commonwealth, rightly assuming they would get the raw end of the deal from the states.

Whereas state governments have had to go cap in hand to the Commonwealth for grants in years past, any transfer to the states of total funding responsibility for local government would have seen councils having to go cap in hand to Sydney or Melbourne, or which ever capital and whatever state. Given the population distribution of Australia and the strengths of the cities, why wouldn't country councils, in particular, have been terrified at the prospect of the states doling out the revenue from the GST. Local government is beholden enough to the states and has long sought its proper recognition in the Constitution in its own right. I feel that, properly explained to the Australian people, the issue would now receive a far stronger vote of support from the electorate than it did at an earlier referendum.

No wonder local governments, 80 per cent of which are regional and rural, fought so hard to retain their funding link with the Commonwealth as opposed to the plan to let the states dole out the GST revenue. Those councils knew that state governments, dominated in turn by either Labor or Liberal administrations, would continue to do what they do so well: dole out help to the marginal seats in the heavily populated areas where votes count most. The Victorian experience, however, should be a warning to state and federal governments alike that rural and regional areas too can make or break governments and must receive a fair share of funding. However, councils are not prepared at this stage to accept that the message has got through, and have rightly argued for a continuation of the funding arrangements represented by this bill.

This legislation proposes the continuation of existing practice whereby local government general-purpose assistance is indexed to population and inflation. But the real problem for local government is the need for real growth in the level of assistance. There is nothing in the bill to suggest help is on the way. There is nothing to indicate that the Commonwealth is the slightest bit interested in local government's argument that it should have a guaranteed real-terms share of revenue equivalent to one per cent of Commonwealth general taxation revenue. In fact, the Australian Local Government Association president, John Ross, confirms that the local government sector needs two per cent of personal income tax or, ideally, six per cent of GST revenue. However, such an arrangement with the GST needs Commonwealth legislation and, most likely, constitutional changes to ensure that a fixed share would indeed be passed on by the states.

Local government should not be the poor cousin of our democratic system. I stated in my first speech in this place that there is an undeniable argument for strong regional local government along with a Commonwealth government. I question the relevance of our states, the waste, the constant arguments over who is responsible for what level of funding, particularly in health care and education. How much easier it would be if our hospitals and schools were all funded from the one source, the Commonwealth. However, with the allocation of GST revenue to the states that ideal is even further away now than it was four years ago. I fear we have now handed enormous power to the states to engage in politically motivated spending rather than nation building exercises. Unless local government is granted real growth revenue, the country/city divide will continue to widen.

Let me record the comments made by Orange City Council's general manager when justifying a general purpose rate increase this year of over five per cent, substantially above the increase fixed by the state under its rate pegging legislation. Mr Allen Dwyer said, among other things, that the financial assistance grant to Orange City Council from the federal government is estimated to be $1.722 million for 2000-01, an increase of $191,000 over the 1992 allocation. This increase, he said, represents 12½ per cent over the past eight years, whereas the average weekly ordinary time earnings has increased 24.7 per cent over the same period. He chose to take that index, but others also can demonstrate the fact that local government is falling behind the eight ball in terms of its fair share of state or Commonwealth revenue.

As Mr Dwyer says, the FAGs are pitifully inadequate. Councillor John Ross, of the Australian Local Government Association, with whom I spoke yesterday, says that the fairly narrow review of FAGs now under way is only a formality. As he says, the bottom line demand from local government is a two per cent share of income tax receipts.

Let me give another example relating to road funding. Oberon council in my electorate oversees a local economy which has defied the difficulties in most regional areas in recent years. Through a large expansion in the softwood timber industry and the winning of forestry contracts by CSR, the level of economic activity has accelerated. In fact, the town has enjoyed full employment for the last few years. Many of the benefits of this economic activity are obviously enjoyed by the shire, its residents and businesses, but much more benefit is enjoyed by state and federal governments and shareholders of the major companies, including the New Zealand timber concern planning to take over the CSR operation.

Benefits through state and federal taxes, notably fuel excises, are the sorts of benefits I allude to, yet the public infrastructure tab is largely picked up by the council and therefore by the ratepayers. Oberon estimates it needs an additional $30 million just to bring its road system up to acceptable standard—not to carry the farmers coming into town or the people who may want to travel from Oberon to Bathurst or Lithgow to do some business or the kids who may want to catch the school bus into Bathurst to some of the larger schools, but to carry the commercial transport that dominates the traffic in many cases on those roads and for which there is hugely inadequate recompense to the council to keep up with the level of road repair that is required.

This year's federal budget provided just $6 million in extra funds for local government roads throughout New South Wales. Growth, which we all want in rural and regional areas, must be met with growth funding for rural and regional local government. While the indexation of roads grants paid to local government makes sense at first glance, such indexation is based on population growth and consumer price index. While the consumer price index is all right for many indexations, it has been suggested in research paper 13 by the Parliamentary Library that a more appropriate index would be a road construction cost index, such as that compiled by the Bureau of Transport Economics. For instance, the road construction cost index rose by 1.75 per cent between 1995-1996 and 1997-98, whereas the consumer price index rose by 1.35 per cent over the same period. One wonders what divergences in these indices will appear when the GST is introduced, irrespective of the ability to claim input costs. Let me quote from the communique of the National Rural Roads Congress in Moree on 7 March this year:

276 delegates of Australia's local governments, community and industry leaders, the engineering profession warned today that Australia's rural road network is on the point of collapse.

Among resolutions was one particularly important statement:

The funding of rural and regional roads is the broadest community responsibility involving all spheres of government and industries that depend on the road network to profit and grow. Australians living in metropolitan Australia also depend heavily upon the rural road network to deliver goods to them.

And to deliver goods, I might add, to our export markets. A report was recently handed down by the House of Representatives Standing Committee on Primary Industries and Regional Services entitled Time running out: shaping regional Australia's future. I note that the chair of the committee, the member for McEwen, is present in the chamber and I pay tribute to the work that she and, indeed, all committee members put into that report. I was proud to be a member of that committee. It made several important recommendations on rural and regional road funding. Recommendation 55 suggested that the 3c per litre of excise collected from fuel sales be preserved for transport infrastructure, with 2c of that devoted to construction and maintenance of regional roads. Another recommendation called on the Commonwealth to encourage state and territory governments to support regional planning for roads by a consortia of regional stakeholders.

The committee heard how the timber road evaluation studies in Western Australia have proved invaluable in this process, but that the `weakest link at the present time is the matter of funding for local municipal roads'. The committee learnt that local government in many cases just did not have the resources to carry out the audits of roads and other infrastructure.

This piece of legislation we are talking about today is important in that it recognises a particular reliance on the Commonwealth by local government for its proper level of support. That proper level has not been achieved. In fact, as I said earlier, it falls well short of what is required. But with better planning and a serious look at the recommendations of that infrastructure inquiry, the answers to the needs of rural and regional Australian councils are available. The answer is not entirely in the marketplace. In a country like Australia, it requires a strong investment and strong leadership from government.

This week the Australian Automobile Association and the National Farmers Federation jointly called for an open inquiry into the national competition policy. Both organisations say that if wrongly implemented, national competition policy threatens to strangle Australia's industries and living standards. That is true. It is also a fact that if competition policy is taken to its extremes, as was the planned imposition of competitive tendering for local government road making, then there would have been no need for the infrastructure when the families of council workers left town.

While competition and economic efficiency are undoubtedly admirable targets for councils and other business communities in rural and regional Australia, there is no way, for example, that a local council road-making operation could compete with a Thiess Brothers contract, with its economies of scale, that could do the job in days, taking the contract money out of town with it. That is the irrationality of the bottom-line rationalist approach. Of course you would save money if you closed every second hospital or shut down every council works depot or even amalgamated every second council, but what would be the social costs of such a policy?

This bill gives effect to the government's undertaking to retain responsibility for payment of general purpose assistance to local government and to maintain the level of such assistance in real per capita terms. For that, we have to applaud the Australian Democrats for at least retaining this important local government-Commonwealth nexus, even while buckling in to the big business tax, which is the GST.

As Wellington Council told me recently, improved road systems are the backbone for improving rural economies. Improved rural economies mean an improved national economy. The council suggested that immediate initial funding to rural roads should be increased by $250 million in the 2000-01 federal budget. That did not occur by a long shot, and the frustration of rural motorists, business and councils is still alive in rural and regional Australia.

Unless there is a serious review of federal assistance grants with real reform and unless there is a realistic addressing of local road requirements in rural and regional Australia, the cost will be not only political for the major parties but social and economic, and all Australians will be the losers.