False economies ahead in forced local government amalgamation

Published 22 April 2014

Ratepayers in the Greater Perth metropolitan area will face higher costs and potentially poorer services under the planned forced council amalgamations according to detailed economic modelling published this month in the Australian Journal of Public Administration.
Director of the UNE Centre for Local Government and one of Australia’s foremost experts on local government amalgamation, Professor Brian Dollery argues that the largest ever local government reform agenda in Western Australia are unlikely to produce any economies of scale across 96% of local government expenditure items.
“Forced amalgamation is a ubiquitous feature of Australian local government reform – compulsory council consolidation programs have occurred in every state and territory in Australia with the sole exception of Western Australia – until now,” Professor Dollery said.
“Invariably, State Governments set the terms of reference for an Independent inquiry, which in turn recommend forced amalgamations, citing economies of scale, with little or no evidence, just as is the case in Western Australia.
“Despite an undertaking to produce ‘evidence-based’ recommendations, the Final Report of the Metropolitan Local Government Panel has failed to employ even rudimentary econometric models in support of its recommendation for the amalgamation of Greater Perth metropolitan local authorities,” Professor Dollery said.
“Apart from citing limited work on Tasmania by commercial consultants, no econometric evidence was produced in support of the WA Government’s claims on scale economies.
“We attempted to remedy this deficiency, using current Perth population data, to estimate three separate econometric models on the impact of amalgamation in Perth local government.
“Our results suggest that scale economies, cost savings and other pecuniary gains are largely illusory. Indeed, only two of the ten main local government functions – comprising just 4 per cent of total expenditure – provide evidence to suggest potential economies of scale.
“There will be no savings for many large expenditure areas such as Governance, Law and Order, Transport, Recreation, Health, Education and Welfare.”
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