The chart below shows what has been happening to local government rates in New Zealand in recent years.


Two points are worth noting. 

The first is the steep rise in the ratio of rates to GDP following the introduction of the Local Government Act 2002.  This is a departure from the trend in the last century when council spending and rates stayed a fairly constant proportion of GDP (while central government spending and taxes rose).

The Clark-Cullen government maintained that the wider purposes and power of general competence bestowed on councils in that Act would not lead them to spend and rate more.  This claim was naïve, as the chart confirms. The forecast implies local government revenue increases of 6.3% per annum to 2019.

Second, the projections suggest that rates will double from around 2% of GDP a decade ago to 4% by 2019. Councils as well as central government are crowding out the private sector.


  1. Which begs the question – what % of GDP is now commandered by the various arms of taxing authorities.?
    At what point will the tax eaters out consume the tax producers ? maybe we are there now ?

  2. Good question and as with much in NZ hard to get a good answer. I have looked at data and made some approximations to determine what percentage on households are net tax payers of income tax plus GST (net of government transfers that is). I have not added on local governement, but I will try to find some data.

    By my calculations approximately 57% of households are net payers of tax (income plus GST). So assuming I am close then we are not far from where net payers of income tax plus GST will make up only 50% of households. By my calculations the cross over point to net payer of income tax and GST is about a household income of $50000 to $60000pa.

    If anyone can point me to an offical calcuation of this that would be great, as I would love to be wrong.

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