Introduction to Australian Local Government Economics and Finance

Abstract

Local government economics and finance have traditionally been thought of solely in terms of revenue and expenditure structures. We argue that performance monitoring needs to be considered as a legitimate and critical third element of local government finance scholarship. The chapter begins with a survey of the current sources of revenue for local government, and a critical review of the theoretical justifications for each source of revenue. We then turn our attention to the other side of the ledger—expenditure—where we also commence our study with a survey of current practice. The scholarly literature in Australia has largely focused on an exhaustive debate regarding whether economies of scale do, or do not, exist. We review the debate and conclude that most of the literature suffers from methodological deficiencies. Moreover, we argue that it is time to shift the debate to an examination of more promising avenues for constraining municipal expenditure . Finally, we build a case for the importance of performance monitoring for addressing the corrosive effects of information asymmetry, providing an account of local government stewardship, and for the purposes of public policy intelligence. The chapter ends with a call to implement a national performance framework, developed in consultation with the sector and founded on rigorous scholarship.