Federal Government Budget 2018-19

Federal Government Budget 2018-19

Overview of Budget finances

The Federal Budget targets a cash deficit of $14.5 billion in 2018-19 and a projected cash surplus of $2.2 billion in 2019-20. In keeping with the way that Australian states and territories and the South Australian local government sector present their budgets (i.e. on an accrual accounting basis), the Federal Budget is targeting an operating deficit (or net operating balance) of $2.4 billion in 2018-19 improving to an operating surplus of $8.6 billion in 2019-20.

The Australian economy is expected to grow at an anticipated rate of 3.0 per cent in both 2018-19 and 2019-20. Despite some volatility in the employment market, the Government is expecting unemployment to reduce to 5.25 per cent in 2018-19. The Government is forecasting that the near-term outlook for inflation will remain subdued with an inflation rate of 2.25 per cent expected in 2018-19.

Budget effects on local government in South Australia

Financial Assistance Grants

Commonwealth ‘Financial Assistance Grants’ (FAGs) for South Australian councils are estimated at $160.2 million in 2018-19. However, approximately $80.0million of these grants will be paid in advance and received by councils in June 2018. The underlying allocation of $160.2 million compares with an underlying allocation of $155.9 million in 2017-18. The increase would have been marginally higher but for a reduction in South Australia's population share relative to other jurisdictions.

FAGs continue to comprise two components: general purpose assistance and local roads grants. Both components are untied and can be spent according to each council’s own priorities. The general purpose assistance component is distributed to states in the first instance on a per capita basis. The local roads grants component is distributed to states on a historical basis whereby South Australia receives only 5.5 per cent of the national pool of funds (a basis which successive Commonwealth Governments have acknowledged is unfair for South Australian councils). The SA Local Government Grants Commission recommends the distribution, to individual councils, of the pool of FAGs funding made available to South Australia in accordance with the Local Government (Financial Assistance) Act 1995, including the National Principles for allocating grants set out in that Act.

Supplementary Local Roads Program

The Commonwealth’s 'Supplementary Local Roads' Program for South Australia was reinstated in the 2017-18 Federal Budget at $20 million per annum for two financial years (i.e. 2017-18 and 2018-19). There is no mention in the Budget papers about a possible extension of this Program beyond 30 June 2019. The Program originally was introduced in 2004-05 to rectify South Australia’s unfair share of the local roads component of FAGs funding. Cessation of the Program had been announced in the 2014-15 Federal Budget with effect from 1 July 2014.

Roads to Recovery Program

The ‘core’ Commonwealth 'Roads to Recovery' Program funding for South Australian councils will remain at $28.4 million in 2018-19. The 2018-19 Budget confirms an earlier announcement that the Roads to Recovery Program will continue beyond its current expiry date of 30 June 2019 and that funding will be increased by $50 million per annum nationally for the financial years 2019-20 and 2020-21 (resulting in annual payments of $400 million nation-wide in those years). A new measure included in the 2018-19 Budget is a continuation of the $400 million funding for a further year (i.e. in 2021-22).

Roads to Recovery funding may be used, at a council’s discretion, on maintaining, renewing, replacing or upgrading existing roads or constructing new roads. The SA Local Government Grants Commission recommends the distribution of the pool of Roads to Recovery funding made available to South Australia. Allocations to individual councils are determined on the same basis as allocations covering the local roads grant component of FAGs.

It is worth noting that, after taking account of Commonwealth funding provided to the Department of Transport, Planning and Infrastructure, which manages local roads in unincorporated areas of the state, South Australia receives 8.3 per cent of the national pool of Roads to Recovery funding.

Bridges Renewal Program

The Commonwealth's 'Bridges Renewal' Program involving payments direct to local government continues in 2018-19 at a funding level of $85 million nation-wide. Outcomes for South Australian councils in 2018-19 are dependent on a competitive application process. Round Four applications are expected to open soon, with any Commonwealth contribution likely to be limited to $5 million per project.

Black Spot Program

The ‘core’ Commonwealth's 'Black Spot' Program provides $85 million of funding in 2018-19 (nation-wide). Payments are made to State and Territory Governments and the allocation to the South Australian Government is estimated at $6.2 million in 2018-19. Outcomes for South Australian councils in 2018-19 are dependent on a competitive application process, although local government’s share of the estimated $6.2 million can be expected to be about $2.0 million.

Building Better Regions Fund Program

Funding for the Commonwealth’s ‘Building Better Regions Fund’ Program has been boosted in the 2018-19 Budget and will now provide funding of $641.6 million over a six year period ending in 2021-22. The Program is designed to support priority community infrastructure investment and employment generating projects in regional communities. Councils are eligible to apply for grant funding on a competitive basis. The Commonwealth is providing $206.5 million for Round Three of the Program, commencing in 2018-19. Grants are available through two funding streams: Infrastructure Projects and Community Investments. A minimum grant amount of $20,000 applies to the Infrastructure Projects stream with a minimum grant amount of $5,000 under the Community Investments stream. The maximum grant amount under both streams is $10 million.

Regional Growth Fund Program

The Commonwealth’s ‘Regional Growth Fund’ Program will commence in 2018-19 and cease on 30 June 2022. The Program is open to local government and provides grants of $10 million or more for major transformational projects, which support long-term economic growth and create jobs in regions. A total amount of $272.2 million has been announced for the five year Program.

Smart Cities and Suburbs Program

The Commonwealth’s $50 million ‘Smart Cities and Suburbs’ Program is supporting the delivery of innovative smart city projects that improve the liveability, productivity and sustainability of cities and towns across Australia. Round Two of the Program, involving $22 million of grants, currently is open with applications closing on 2 July 2018. Round Two specifically encourages applications for collaborative projects, led by councils, which apply innovative technology solutions to urban challenges, delivering economic, social and environmental benefits. Grant funding, with a minimum amount of $250,000, is available on a nationally competitive basis.

Heavy Vehicle Safety and Productivity Program

The Commonwealth’s ‘Heavy Vehicle Safety and Productivity’ Program commenced in 2014-15 and is providing ongoing funding of $230 million (nation-wide) over four years from 2017-18. An amount of $60.0 million has been allocated for 2018-19. The Program seeks to deliver improved safety and productivity for the heavy vehicle industry. Councils are eligible to apply for grant funding on a competitive basis.

Other

A new ‘Roads of Strategic Importance’ Program has been announced in the Budget with funding of $3.5 billion to support the upgrade of key regional road corridors. It is not clear at this stage how the Program might apply to local roads. As more detailed information becomes available, the LGA will analyse it and provide advice to councils, together with any corrections or clarification needed on any of the abovementioned Programs. The LGA also will provide advice on any material changes to a variety of other ongoing Commonwealth Programs (or new Programs) which may have direct or indirect implications for South Australian councils. The main Programs involved are:

• Community Development Grants;
• Direct Action Climate Change Measures;
• Home Support Program;
• Mobile Phone Black Spots;
• National Partnership Agreement on Preventative Health;
• National Bushfire Mitigation;
• Natural Disaster Resilience;
• Natural Disaster Relief and Recovery Arrangements;
• Regional Aviation Access;
• Regional Development Australia Committees;
• Safer Communities Fund; and
• Stronger Communities Fund.

LGA of SAECM 661084 Federal Government Budget 2018-2019 Page 1 of 3