New rate cap of 3.5 per cent for all Victorian councils for the 2023/24 financial year

Councils are expected to take full advantage of a rate hike, which the Andrews government says is necessary to “deliver vital community services”.

Victorian households are set to be hit with higher rates over the next financial year in a move that’s been slammed by a peak representative body.

The Andrews government on Thursday announced a new rate cap of 3.5 per cent had been set for all Victorian councils for the 2023/24 financial year.

It’s an increase from the 1.75 per cent cap that was enforced this year. Prior to that, rates were capped at 1.5 per cent, which was the lowest it had been since the Fair Go Rates system was introduced in 2016.

Before that system came into place, households were often slugged with an average yearly rate increase of up to six per cent.

The new rate cap will apply to all Victorian councils for the 2023/24 financial year.

Local Government Minister Melissa Horne said the decision to increase the rate cap was guided by independent advice from the Essential Services Commission (ESC) which recommended a four per cent cap in line with the Consumer Price Index.

But Ms Horne said the government decided to set the cap less than that advice in a bid to recognise soaring cost of living pressures.

“The rate cap for the next financial year takes into account higher inflation and the need to protect Victorians from uncontrolled rate hikes, while ensuring councils can continue to deliver vital community services,” she said.

“Community members have the chance to engage with their local councils as they make decisions about rate rises through their budget process each year.”

Melissa Horne says the decision was based on independent advice. Picture: Getty

Each council is responsible for setting rates within the rate cap based on the needs of their community, but Ratepayers Victoria vice president Dean Hurlston warned every council would take full advantage of the rate hike.

Mr Hurlston said he was anticipating an increase from 1.75 per cent to about 2-2.5 per cent, adding the 3.5 per cent figure was too high.

Mr Hurlston said most ratepayers would be forced to cough up an extra couple of hundred dollars each year now.

“At a time when cost of living is crushing every household, the government claims 3.5 per cent is modest but for many, this is just another kick in the guts,” he said.

“Every council will take the 3.5 no doubt. Councils have been complaining for far too long that they are underfunded but the truth is they are inefficient bloated bureaucracies.”

Mr Hurlston said greater scrutiny needed to be put on how local governments use ratepayer funds but feared there would be less transparency after the Local Government Victoria oversight body was “swallowed up” to operate within the Department of Government Services in the latest cabinet shakeup.

“This will lead to less of a focus on councils being made to be efficient,” he said.

“It’s dangerous to get rid of the only department that focuses on local government and allow local government to do its own thing.”