Council Cost Index 2013

Circular: 2013/017 | FOR INFORMATION

A 2013 Council Cost Index of +3.3% has been calculated using ABS December quarter 2012 data. This Circular also explains a change to the way the index is calculated from 2013.


The 2013 Council Cost index indicates that an average rate increases across the State of +3.3% on a per capita basis may be necessary in 2013/14 to maintain the current level of service, assuming other revenue sources (eg grants) also increases in line with costs. LGAQ Circular 2012-077 (27 April 2012) provided a 2012 Council Cost Index (CCI) of +3.6%.

Since 2005 LGAQ has published a CCI to better reflect the cost increases associated with the delivery of local government services recognising that the CPI alone does not reflect cost increases across the range of council services. Until 2012 the CCI was calculated from a 50% weighted, 5 year moving average of the CPI for Brisbane and the Road and Bridge Construction Cost Index for Queensland (ABS). The road and bridge index proved to be volatile and movements in some periods did not reflect the reality faced by councils. To address this problem a five year moving average was applied to the index.


LGAQ has sought to further refine the method for calculating the CCI and undertook a review of local government cost indexes developed by other jurisdictions. The review indicated that wage costs, road and bridge costs and the CPI are the most common elements used in local government cost indexes. In Queensland, employee costs represent some 43% of operating costs (before depreciation) while roads and transport outlays are around 30% of total outlays.


Using this composition of local government costs a modified index has been adopted for Queensland local government from this 2013 release based on the wage price index (50%), road and bridge construction index (30%) and the CPI for Brisbane (20%).


The Local Government Cost Index provides an aggregated picture of cost movements at the State level. The mix of construction and non-construction activity varies from council to council. Similarly, there are parts of the State where construction costs have been increasing faster than the State average. Such factors will all be of relevance at the local level when determining the level of rate increase necessary to provide the desired level of service.


For further information on the Council Cost Index please contact Ronald McMillan roland_mcmillan@lgag.asn.au or telephone 07 3000 2222


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