2012 Council Cost Index
ABS data released to date indicates no substantial increase in construction costs has resulted from potential pressures due to flood and cyclone damage in early 2011. Assuming other revenue sources (including grants) increase in line with costs, an average rate increase across the state of +3.6% on a per capita basis may be necessary in 2012-13 to maintain current service levels.
LGAQ Circular 2011-159 (4 March 2011) provided details of the Local Government Cost Index for 2011-12. An average annual increase in the Local Government Cost Index of 4.2% was identified for the five years 2006 to 2010.
Potential cost pressures from the flood and cyclone damage in early 2011 were also noted in the 2011 circular and it was proposed that rate increases of up to 7.5% might be necessary if there was a consequent rapid increase in civil construction costs.
However, ABS data for 2011 released to date indicate no substantial increase in construction costs has yet resulted from pressures due to flood and cyclone damage in early 2011. The ABS Road and Bridge Index for Queensland increased by 1.9% from Dec 2010 to Dec 2011.
The 2011-12 general rate increase across the State was relatively modest compared with previous financial years. Total general rate revenue on a per capita basis increased by 3.5% in 2011-12, compared with 6.3% in the 2010-11 year.
Table 1 provides details of the price movements from 2005-06 to 2010-11 for a number of relevant price indices.
Source: ABS Catalogues 6401.0, 6345.0 and 6427.0.
Table 2 provides details of the five year moving averages of percentage changes in each of the above indices, along with the calculation of the Local Government Cost Index for 2012.
The Council Cost Index 2012 change is +3.6%, calculated from a 50% weighted, 5 year moving average of changes in the CPI for Brisbane and the Road and Bridge Construction Cost Index for Queensland (ABS).
Based on average price movements over the past five years, an average rate increase across the State of +3.6% on a per capita basis may be necessary for 2012-13 to maintain the current level of service. This assumes other revenue sources (eg grants) increase in line with costs.
The Local Government Cost Index only provides an aggregated picture of cost movements at the State level. The mix of construction and non-construction activity varies from council to council. Similarly, there are parts of the State where construction costs have been increasing faster than the State average. Such factors will all be of relevance at the local level when determining the level of rate increase necessary to provide the desired level of service.
Source: ABS 6401.0 & 6427.0