Victorian Councils Cry Poor – But Refuse to Embrace Amalgamations to Cut Costs
- Dean Hurlston
- 6 days ago
- 4 min read
In recent months, a growing chorus of Victorian councils has intensified its campaign to scrap the State Government’s rate cap policy. Claiming financial hardship, rising inflation, and the burden of service delivery, local governments argue they need more "revenue flexibility" to continue meeting community expectations. But while they paint a picture of looming insolvency and declining services, these same councils staunchly oppose the most obvious structural reform available to them: amalgamation.
The rate cap, introduced in 2016, currently limits council rate increases to a set percentage—3% for the 2025–26 financial year. Councils argue this is unsustainable, and point to rising wage costs, asset renewal backlogs, and increasing demand for community services. The Municipal Association of Victoria (MAV) and Local Government Professionals (LGPro) have both publicly lobbied for the cap to be lifted or abolished, framing it as a blunt instrument that hampers “local autonomy.”
Yet in the face of genuine cost pressures, one has to ask: why aren’t councils taking equally bold steps to rein in their own spending? The answer lies in a political paradox—councils want more money from ratepayers but refuse to restructure their bloated, inefficient bureaucracies or entertain the prospect of mergers that could save millions.
The Elephant in the Council Chamber: Structural Reform
Victorian local government has not seen serious amalgamation since the sweeping reforms of the 1990s, which reduced the number of councils from 210 to 78. The process, led by the Kennett Government, was disruptive and politically charged—but undeniably effective in eliminating duplication, reducing administrative costs, and professionalising service delivery.
Today, many of those cost benefits have eroded. Across Melbourne and regional Victoria, dozens of councils now operate as mini-bureaucracies, each with their own CEO, executive team, IT department, fleet services, and communications units. The duplication is staggering. Ratepayers in neighbouring suburbs often pay different amounts for the same services—waste collection, planning, community grants—while behind the scenes, overhead costs chew through millions.
Instead of revisiting the proven model of council mergers, the sector remains stubbornly committed to a system that rewards administrative empires and protects local fiefdoms. As financial pressures mount, this reluctance is looking more like negligence.
Crying Poor While Sitting on Millions
Many councils claim they are running out of money. But a closer look at the books tells a more nuanced story. Councils across Victoria collectively hold billions in cash reserves and investment assets. Some even post annual surpluses—yet argue they need to hike rates beyond the cap to remain viable.
Employee costs are the single largest expenditure in almost every council. In 2023, Victorian councils collectively spent more than $4 billion on staff salaries and associated costs. In many cases, the ratio of back-office workers to frontline service staff continues to grow. Despite this, councils rarely talk about cutting costs internally. Instead, they threaten service reductions, asset sales, or higher fees for residents.
If councils are truly cash-strapped, why aren’t they pursuing voluntary amalgamations to drive down structural costs? The answer is as political as it is practical: councils know that amalgamations could reduce the number of senior bureaucrats, elected councillors, and the executive perks that come with both.
Amalgamations: A Missed Opportunity
Economies of scale are real—and achievable—through strategic amalgamation. Combining neighbouring councils with overlapping service areas could save tens of millions annually. IT systems could be unified. Procurement could be centralised. Rate collection, compliance, planning, and asset management could all be streamlined.
There are countless examples where merger would make sense: Darebin and Merri-bek, Boroondara and Stonnington, Frankston and Mornington Peninsula. These councils share borders, demographic similarities, and service profiles. In many cases, residents already cross municipal boundaries for everyday services.
Yet any suggestion of amalgamation is met with fierce resistance. Council lobbies argue it would erode “local identity” or “reduce democratic representation.” The irony, of course, is that the same councils regularly reduce community consultation, operate with little transparency, and make multi-million-dollar decisions behind closed doors.
The Real Cost: Trust in Local Government
By rejecting even the discussion of amalgamation, councils undermine their own credibility. Ratepayers are increasingly frustrated by skyrocketing executive pay, lack of accountability, and what many see as councils prioritising bureaucracy over service. It’s no wonder trust in local government is low. According to various surveys, fewer than half of Victorians believe their council delivers good value for money.
Councils cannot have it both ways. They cannot demand higher rates from residents while refusing to review and reduce their own structural excesses. Any mature, evidence-based conversation about local government sustainability must include council mergers as part of the solution.
Conclusion: Time for Courage
Amalgamations aren’t a silver bullet—but they are a necessary part of the reform puzzle. Instead of fixating on lifting rate caps, councils should be examining how to deliver more with less, as other sectors have done. The public expects services—not excuses. If local government is to remain relevant, it must evolve beyond protecting its own institutions and start putting communities first.
Victorians are ready for a new conversation—one that puts ratepayers, not bureaucracies, at the centre. If councils won’t lead that change, then the State Government must.
It's interesting that peak bodies like the MAV already have a framework for "regionalising" Councils. You can see it here:
Perhaps we need to follow the QLD model of merging multiple councils together, cutting overall staff and administration costs, freeing up millions to spend on what really matters to you, as well as continuing downward pressure on rates bills.
Yep, structural reform urgently needed. Too often us ratepayers left with the burden of poor decision making by councils while councils trot out the same old whining about "costs going up", "it's the rate cap" or "it's cost shifting" while doing nothing about looking inwards for solutions.
Has anyone seen a council actually quantify the amount in their budget that is impacted by cost shifting? Every year the council budget bangs on about this, uses library funding as an example but no one can ever say that cost shifting impacts the budget by $x million.
Some level of amalgamation or at least shared services model for back office functions and some operational services should be implemented. Ratepayers benefit through mor…
People are still disoriented by Kennett's council amalgamations, which seem to have been used to distance councils from residents and to create large organisations with state appointed CEOs in charge, bringing in increasingly rigid bureaucracies. This has ushered in a situation where the state is taking over local government. This is particularly obvious with the imposition of metropolitan activity centers, which remove all relevant local resident input to governance, privatising and commercialising local space, removing it from political and social activity, like handing out how to vote cards or speaking publicly. Councils are now too big for spontaneous participation in meetings. 'Saving money' is a short-term gambit when local political space and local political interaction are sacrificed for more structu…
Our community has experienced a decline in services and a rise in rates following the previous council amalgamation, with resources disproportionately benefiting the other former council area. Further amalgamation would exacerbate this inequity, leading to severely reduced services and a loss of local community connection opportunities.
Can't totally agree with amalgamations. The 1990's amalgamations of inner Melbourne councils worked well, however the outer "interface councils" are now trying to deal with urban and rural complexities, have a look at Yarra Ranges, a basket case. Not only residents, but staff as well, trying to balance the expectations of both areas.
Excellent article!
How do we get the ball rolling???