Australia: The Third Sphere Steps Up

The Third Sphere Steps Up
Australia has around 700 local governments. They are extremely varied
with populations ranging from less than a hundred to nearly a million, and
areas from a few square kilometers to the size of a small country. By international
standards, the average population of some 30,000 is fairly large,
but in economic terms the local government sector in Australia is quite
small. Its functions are generally limited to municipal services and local
infrastructure. It raises less than three percent of all taxes and its annual
expenditures of around $20 billion AUD account for only 2.5 percent of
Gross Domestic Product. Its place in the federation is undefined and at
risk: local government is not recognized in the Australian constitution and
is established wholly under state laws. Democratically elected councils can
be dismissed by state governments, boundaries changed without referenda,
and all aspects of local administration subjected to detailed state control.
Local government’s limitations are especially apparent in metropolitan
regions, which are managed principally by state agencies. Larger cities are
divided into numerous local government areas, whose councils find it difficult
to play a strategic role in metropolitan planning and development.
Brisbane is to some extent an exception, as the City Council governs around
10 Graham Sansom
half the metropolitan area and is a major provider of urban infrastructure
and public transport. Even there, however, there is increasing state control
as a result of pressures arising from metropolitan expansion far beyond the
city’s boundaries, combined with growing concerns about water supplies.
All this might suggest very weak local government, and in some respects
that is certainly the case. Smaller rural and remote councils have extremely
limited capacity to provide services and depend heavily on state and federal
support. Yet local government as a whole is more than 80 percent selffunding,
and in several areas of public administration – roads, recreation,
waste disposal and in some states water supply and sewerage – it plays a
leading role. In general, local government’s revenue base matches its functions
quite well, and larger councils are able to operate quite autonomously
and promote the well-being of their communities across a broad range of
By contrast, all state governments are heavily dependent on transfers
from the federal government. State autonomy has declined steadily for the
past half-century due to High Court interpretations of the constitution
and loss of taxation powers to the federal government, which as a result of
its financial strength now dominates almost all key areas of public policy.
Local government has been deeply affected by this shifting balance of
power. The federal government has become by far the greatest source of
funding support for councils, providing over $3 billion per annum in
general and special-purpose grants. Indeed, federal support has been one
of the key drivers of a major expansion in local government’s role over the
past half-century. Arguably, it has also enabled state governments to shift
some of their responsibilities and associated costs on to local councils
(“cost shifting”).
As well as providing financial assistance, the federal government has
forged direct working relationships with councils, both singly and through
regional groupings, and has supported local government representation
in a wide range of intergovernmental forums. All this has occurred “outside”
the constitution, which is largely silent on intergovernmental relations,
and which could well be interpreted as prohibiting direct federal transfers
to local government if the states were ever to mount a challenge.
Local government is now represented in virtually all those federal forums
in which it has a specific interest. Those include around 14 councils of
federal and state ministers, plus the peak Council of Australian Governments
comprising the federal prime minister, state premiers, territory
chief ministers and the president of the Australian Local Government
Association (ALGA).
Since the early 1980s there has been a federal minister with the words
“local government” in his or her title. In 1995 the federal government and
ALGA negotiated a “Commonwealth-Local Government Accord” that articulated
shared policy agendas. This was short-lived, as the conservative coalition
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elected in 1996 initially favoured a more traditional “states rights” agenda.
In recent years, however, that same government has taken various steps to
strengthen federal-local relations, which are probably now closer than ever.
These have included “Roads to Recovery” grants paid directly to councils;
federal inquiries into local government’s financial position; negotiation of
a tripartite intergovernmental agreement on cost shifting; and a parliamentary
resolution recognizing local government as part of the federal system.
These moves undoubtedly reflect the situation of a conservative federal
government confronted by Labor governments in all states and territories,
and which thus finds it convenient to engage at local and regional levels
through cooperation with councils. However, they are also a manifestation
of underlying changes in the Australian federation.
The question now for Australian local government is how to capitalize
on recent advances and secure its federal presence. Can it really justify its
claim to be the “third sphere” in the federation? It faces a number of challenges
in that regard. First is financial sustainability: recent inquiries have
shown that around 25 to 40 percent of councils – mainly smaller rural
and regional councils – may be unsustainable in the medium term. Their
evident lack of capacity undermines the credibility of local government as
a whole, as does a “poor cousin” or mendicant
mindset that also pervades some larger councils.
Secondly, local government needs to reinforce
its position in the system of government. Amongst
other things, this means increasing community
support by deepening local democracy, and
demonstrating its capacity to provide better local
and regional governance through effective
strategic planning, coordinated service delivery
and cooperation between councils.
Thirdly, local government has to strike the right
balance in its relations with federal and state
spheres. It needs close links with the increasingly
powerful federal government, but remains legally
subject to the states and cannot afford to compete
with them for federal support. Most of the time Australia still operates as
a two-tier federation, and local government also needs to work hard to
maintain productive state-local relations and to convince the states of its
value as a partner.
Recognition in the federal constitution has become a much-desired goal
for many in local government. However, it is doubtful whether any achievable
constitutional amendment would make a real difference to existing
arrangements. To enhance its status, local government must address its
weaknesses and prove itself capable of sustaining a broader role.
Local government
has to strike the
right balance in
its relations with
federal and state
spheres. It needs
close links with the
increasingly powerful
federal government,
but remains
legally subject to
the states.