Victorian households will see council rates rise by no more than 2.75% next financial year, after the state government confirmed a new rate cap designed to ease cost-of-living pressures. But while the move may offer short-term relief for residents, local councils say it risks tightening their budgets to breaking point.
A Cap Meant to Ease the Pressure
The decision, announced by Local Government Minister Nick Staikos, follows Treasury forecasts for consumer price growth. The government argues the cap will help Victorian families manage rising expenses while ensuring councils still deliver essential services such as waste collection, childcare, and local infrastructure.
Officials described the measure as a continuation of efforts to keep household costs under control, insisting the cap has “made a real difference to family budgets” since its introduction in 2016.
Councils Push Back
Not everyone agrees. The Municipal Association of Victoria (MAV) criticised the move, arguing that linking the cap to CPI forecasts doesn’t reflect the real cost pressures councils face. Expenses for materials, construction, and staffing have risen far faster than inflation, leaving many councils struggling to keep up.
The MAV wants the state to adopt a Local Government Cost Index, which would more accurately measure council spending needs. Without reform, the association warns that local infrastructure — from roads to kindergartens — could deteriorate, and community services may face cuts.
Some council representatives have expressed concern that the new limit will push municipalities to rely on alternative revenue sources, such as higher parking fines or service charges, to fill the funding gap.
Households Welcome Relief, But Questions Remain
While ratepayers may appreciate a smaller increase, some community advocates fear councils will be forced to make tough trade-offs. Tanya Tescher, from the Victorian Ratepayers and Residents Association, said to The Age that although residents want lower bills, they also expect councils to maintain essential services without wasteful spending.
The government also introduced updated guidelines for waste management charges to ensure that fees align more closely with actual service costs.
A Balancing Act
Since rate capping began in 2016, increases have rarely exceeded 3%. Yet inflation spikes following the pandemic exposed the limits of the system. Councils warn that keeping caps too low for too long risks undermining their ability to plan, invest, and deliver local projects.
With the new 2.75% cap now locked in for 2025–2026, the debate between affordability and sustainability is far from over — and the strain between state oversight and local autonomy is only growing.
