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Tuesday, 25 November 2003
Page: 22812


Dr SOUTHCOTT (4:46 PM) —For me, there are two key recommendations in the cost shifting inquiry report which was tabled yesterday. The first and most important is recommendation 16, which prescribes a national model of funding that is consistent across each local government boundary. It proposes that the distribution of funds be done on the principle of equalisation and on the basis of need. It recommends funds to be paid directly to local government, that the funds should be untied and from one pool, that the new model should be phased in over the next three years and that this should be facilitated by the Commonwealth Grants Commission.

As members will know, this recommendation had the unanimous support of the committee, as did the whole report. The committee proposes keeping the general purpose pool and the identified road component of FAGs—financial assistance grants—untied and that they all be collapsed into the one pool.

The second key recommendation is recommendation 6, which proposes an intergovernmental agreement which recognises cost shifting. It allocates the revenue to local government from the relevant level of government, if there has been a devolvement or devolution of responsibilities, to address state restrictions on local government revenue such as rate capping and also proposes local government impact statements for state and Commonwealth legislation which have an impact on local government.

I do urge the new minister, Senator Ian Campbell, to look very closely at those two recommendations, and I hope he will adopt them. I note that in his media release yesterday he welcomed the Hawker report and has announced that the Department of Local Government, Territories and Roads has established a local government task force. Its report will form the basis of a submission that the government will consider. That consideration is expected to take about four months. I would not like to see it taking any longer. I would like to see a prompt response to this report because there are a number of issues, especially in my home state of South Australia, which do require addressing urgently.

As the previous speaker, the member for Kingston, pointed out, South Australian councils received $80.5 million or 7.7 per cent of the general purpose grant in 2003-04, which was allocated on a per capita basis. But South Australian councils received only $25.5 million or 5.5 per cent of local road grants in 2003-04. This has been the case since 1991. The state has 7.7 per cent of the population and 10.9 per cent of Australia's local road length. This is an inequitable situation. I saw recommendation 16 as being the best way to address the problems that we have in interstate distribution. It is an inequitable situation where 5½ per cent of local road grants goes to a state with 10.9 per cent of Australia's local road length. The 1999 Premiers Conference looked at this issue, but there was no uniform view among the states and territories. So the Australian government gave $100 million or over eight per cent of the $1,200 million in the Roads to Recovery program to South Australia in recognition of what must be much closer to the state's share. It also established the cost-shifting inquiry which reported yesterday.

I now turn to some of the history of why we have got to this position. The 5.5 per cent share of FAGs for local roads is the result of an agreement in 1986 between the South Australian government and the Australian government. This allowed the South Australian government to retain one-third of South Australia's local road grants for the local roads it maintains. In 1991-92 this arrangement was retained when twothirds of the grants became untied and were paid to councils as FAGs under the Local Government Financial Assistance Act. The remaining one-third went to the South Australian government as a state general purpose grant and was subsequently incorporated into the GST revenue.

During the period 1974-75 to 1997-98, the Commonwealth Grants Commission showed that state assistance as a proportion of local government revenue in South Australia fell from 10 per cent to five per cent. In 2000-01 the South Australian government provided only $1 million in grants to councils for spending on local roads. This compares with, for example, $63 million in Queensland and $62 million in Western Australia. Since then it has been cut further so that the South Australian government provided only $700,000 in grants to councils for spending on local roads in 2002-03 and 2003-04. Also, from 1977-78 until 1990-91, the South Australian share of local road grants across the range of federal road programs ranged between 7½ to eight per cent. This was always the proportion. In 1991 it fell to 5.5 per cent and has remained there since. As I said before, the South Australian government provides $700,000 to councils for local roads and claims to fund a very modest 319 kilometres of roads, which it classifies as local roads in incorporated areas. The point I would like to make is that the South Australian state government could do much more.

In turning to the issues raised in the inquiry, as I said before, I urge the new minister to adopt recommendations 16 and 6. Significantly, I think recommendation 16 will in many ways address the problems of having a lower ratio of funding for road funding and of having the general purpose grant done on a per capita basis. This will have significant advantages for South Australia.

Lastly, I turn to the issue of the minimum grant. The major councils within my electorate are Mitcham Council, Marion Council, Holdfast Bay and part of Onkaparinga. For the established councils such as Mitcham and to an extent Marion and Holdfast Bay the abolition of the minimum grant was an important issue. They supported the retention of the minimum grant. In the end, I could see that on balance there were significant advantages for these councils in an equalisation model in that the increase that they should get in road funding and potentially in the general purpose grant would more than outweigh the abolition of the minimum grant. So it is not a full equalisation model but a partial equalisation model that we are proposing. It will have significant advantages. It will allocate funds directly from the Commonwealth to local government on the basis of the council's need.