By Angela Dorizas

Australia has bucked the global trend and avoided a recession, but for local government in Victoria, the future economic outlook is constrained.

The Municipal Association of Victoria (MAV) has warned that council costs are likely to increase by an average of three per cent in 2009-2010.

MAV’s annual Local Government Cost Index, released this week, revealed that growth in council costs had slowed in response to the economic downturn, but councils would continue to outlay more to deliver the same level of services to their communities.

MAV president Bill McArthur told GovernmentNews that councils were “not recession proof”.

 “Local government relies heavily on staff and contractors to deliver more than 100 services to communities and extensive capital works programs to maintain and renew community infrastructure worth more than $47 billion,” Cr McArthur said.

“Councils are not recession-proof and must continue to deliver high quality services that support community needs, while also limiting cost increases to reduce the pressure on ratepayers. It is a difficult balancing act.”

Wednesday’s national accounts figures, which revealed 0.4 per cent economic growth for the March quarter, were of little comfort to Victorian councils.

“That was a welcome figure, of course, but we’re certainly not out of the woods,” Cr McArthur said.

 “We need to be much more efficient in the way we work. Through the Future of Local Government program we’re looking at more efficient ways to purchase services, so in the procurement area we’re making great gains.”

Despite substantial growth in councils’ construction expenditure, Cr McArthur called on councils to increase spending to address the annual $280 million infrastructure backlog.

“If assets aren’t adequately maintained and renewed it creates a huge cost impost on future generations.”

However, Cr McArthur urged councils to examine all possible opportunities to “trim non-essential costs and improve productivity and service deliver”.

“It is incumbent upon governments to show restraint and demonstrate compassion during these challenging economic times,” he said.

“This year we’re seeing some council budgets propose reduced surpluses or increased borrowings for capital works in order to limit rate increases for property owners.

“These are responsible approaches if used as short term financial measures to help stimulate the economy.”

“In the long term it will reduce costs, because it is bringing forward infrastructure improvements, needed infrastructure. Hopefully they keep going with that infrastructure fund, which will alleviate a lot of the long term costs.

“In the short term it probably creates another problem in where we probably need to look at borrowing to supplement some of the infrastructure funding, so we need to be responsible in the way we do it.”