New development: Smoke and mirrors—fallacies in the New South Wales government's views on local government financial capacity

Abstract

As many readers of Public Money & Management know, the New South Wales (NSW) government is planning large amalgamations of councils, especially within metropolitan Sydney, motivated in large part by a quest for financial savings. The historically weak financial results of many councils in Sydney have been largely a function of the regulatory environment, notably rate-pegging, and reflect recent changes in financial accounting benchmarks. More fundamentally, the financial capacity of local councils is a function of the income level of the local community and not of its size or population. In this paper, the authors explain differences in expenditure per capita by differences in income and services. Larger councils will not improve financial capacity.