Local Government Amalgamations

Abstract

Amalgamation has been the principal public policy tool employed by Australian architects of local government reform. The purported reasoning for forced amalgamations is that larger councils are able to achieve economies of scale and thus produce services at lower unit cost, leading to downward pressure on municipal taxation . However, as noted in Chap. 7 it is not at all certain that local government production functions are characterised by economies of scale. Moreover, no thought seems to have been given to diseconomies of scale , which reduce municipal efficiency and put upward pressure on local government fees and taxes. This chapter commences with a brief overview of the long and pervasive history of municipal amalgamation in Australia. We then provide a critique of the Fit for the Future program of forced amalgamations most recently underway in New South Wales. This critique forms the basis for outlining a new and innovative approach to boundary reform which emphasises enhanced economic welfare through morally licit processes supported by rigorous analysis and genuine consultation. The chapter ends with some brief observations on the public policy implications arising from our study.