Local Govt has to tighten belt too


Prime Minister John Key’s address to the Local Government conference included this message:

. . . Councils have a role to play in creating an  environment that is conducive to sustained economic growth – just as  central government does.

And just as central government does,  local government also needs to work on delivering better services to New Zealanders within tight financial constraints. . .

Better services within tight financial constraints isn’t easy but it’s necessary.

Central government has done its bit by tightening its belt.

Businesses, households, individuals and farms have also reined in debt, increased  savings and made changes in response to the Global Financial Crisis.

Like everyone else, local government needs to do the same, and continue to  do so as we move forward. And I am aware that, in some cases, that  process has been started.

Some councils are already thinking outside the box and proactively working together to share resources, thereby cutting costs.

As I said earlier local government makes up an important part of the  economy – around 4 per cent of GDP – so it has a big part to play.

Times are tight and ratepayers just can’t endure unaffordable rates rises. We are not telling you how to do your jobs, but we would urge you to think carefully about the capacity of your communities during these difficult financial times. . .

Rate increases have consistently been much greater than the rate of inflation, even if population growth is taken into account too.

One reason for that has been costs imposed on local government from central government.

But that is only part of the problem.

Too many councils have created empires of people who appear to do little more than add to the costs for ratepayers. Others have got away from their core business and poured money into expensive and unsustainable projects.

Central government has tightened its belt, businesses and households have tightened theirs, it’s time local government did too.

On-farm inflation 9.7%


A 9.7% increase in costs for sheep and beef farmers in the year to March 2008 is the highest rate of on-farm inflation since 1986-87 when input prices rose 13.2%.

The previous year the price of inputs increased 2.7%.

Major increases were:

Fertiliser, lime & seeds:         30%

Fuel:                                      23.5%

Feed & grazing:                     13.7%

Interest:                                 9.0%

Electricity                               7.2%

Local Govt. rates                    6.6%

Although the high dollar reduced the price of imported goods, fertilsier, lime and seed prices still increased by 30%. The price of fertiliser increased from $260 to $480, another 60%, between March and June, June but that is not included in these figures.  

Local Government rates increased 6.6 per cent. This was the second largest increase in 17 years and in the last five years the overall increase was 33 per cent, an average of 6.6 per cent per year. The overall cumulative increase over 5 years to March 2008 was 22.7 per cent, while over 10 years the increase was 37.0 per cent.

In comparison the CPI rate of increase over 5 years was 14.0 per cent, well below the 22.7 per cent for sheep and beef farm input prices

If interest is excluded, the underlying rate of on-farm inflation in 2007-08 was up 8.3 per cent.

Meat & Wool Economic Service figures for the annual on farm inflation percentage change in the past 10 years:

including interest        (underlying % change) excluding interest

1998 -99         -2.0%                                          0.9%

1999-00                 2.8                                                             1.4

2000-01                 5.2                                                             6.0

2001-02                 1.7                                                             2.8

2002-03                 3.6                                                             3.4

2003-04                -0.2                                                             0.0

2004-05                 4.1                                                             3.7

2005-06                 4.8                                                             5.2

2006-07                 2.7                                                             2.7

2007-08                 9.7                                                             9.8


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