Local government costs are projected to rise faster than CPI over the next year, figures released by the Municipal Association of Victoria (MAV) showed.

MAV president Cr Dick Gross said while cost increases have been reduced from five per cent in the previous year, the Cost Index calculated by the MAV shows they still increase faster than CPI.

“To provide the same level of programs and services to communities as last year will cost an extra 4.4 per cent in the year ahead,” he said.

“Councils will have to meet higher expenses just to stand still.”

Cr Gross said it was not realistic for many municipalities to limit rate increases to CPI due to the different nature of local government expenses from that of household expenses.

“The rising cost of delivering a ‘basket’ of council services is not reflected in the Consumer Price Index due to the majority of council spending being driven by labour costs, and to a lesser extent construction costs,” he said.

He said the State and Commonwealth governments’ policy to link indexation of many grants to CPI or less was “a largely irrelevant benchmarking tool”, adding to council’s cost pressures.

“The MAV is hopeful that an upcoming national review of taxation will provide more appropriate growth in financial assistance from other levels of government to help ease the annual pressure on councils to go cap in hand to ratepayers.

“Cost increases are an unwelcome reality in every aspect of our lives. Councils are no different and have a limited capacity to absorb increases without it affecting rates or the level of services provided,” he said.