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$1.2 billion in financial assistance grants for 1997-98

The estimated entitlement for Local Government financial assistance grants in 1997-98 is $1.213 billion, as announced in the 1997 Federal Budget. This is a rise of around 0.8 per cent (or $9.3 million) from an estimated entitlement of around $1.204 billion in 1996-97.

In commenting on the level of Local Government financial assistance grants for 1997-98, the Federal Minister for Sports, Territories and Local Government, the Hon Warwick Smith MP said, "This Government is mindful of the importance of the financial assistance grants to Councils, especially for Councils in rural and regional Australia."

"In the last two Budgets, despite the severe budgetary difficulties, the Federal Government has managed to keep the financial impact on Local Government to an absolute minimum."

The Minister wrote to all Mayors in May explaining to them the changes to the financial assistance grants for 1997-98. The level of Local Government financial assistance grants is determined under the Local Government (Financial Assistance) Act 1995. Each year, the size of the grants is adjusted to reflect movements in general revenue assistance provided by the Commonwealth to the States.

State assistance is adjusted annually for inflation and population growth - this is called 'real per capita indexation'. In response to the Budget deficit, the States agreed last year to provide fiscal contributions to the Commonwealth in each of the three years commencing 1996-97.

Last year the Commonwealth ignored these State contributions and fully adjusted Local Government grants for inflation and population growth. This year, faced with the need for continuing fiscal restraint, the Government has decided that grants to Local Government will be increased in line with inflation.

The resulting savings in Local Government financial assistance grants is around 1.2 per cent or $14.7 million. This is significantly lower than the 3.7 per cent contribution sought and paid from State Governments.

In 1998-99 and subsequent years, it is intended that financial assistance grants to Local Government will be increased to reflect the real per capita indexation of general revenue assistance to the States. In addition, as a result of the normal end of year reviews, an adjustment of around $8 million will be made due to the fact that inflation for 1996-97 was lower than predicted at the start of the year.

The payment of financial assistance grants to Local Government in 1997-98 will therefore be around $1.205 billion - that is, the estimated entitlement for 1997-98 of $1.213 billion less the inflation adjustment in 1996-97 of $8 million. Accordingly, the total payments this year will be less than last year even though the Government has increased the entitlement.

Grants to individual Councils for 1997-98 will be determined by the relevant Grants Commission in each State and the Northern Territory.

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