FRIDAY GRAPH: LOCAL GOVERNMENT RATES

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.

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