State-imposed limitations on local government revenue and expenditure represent an especially draconian form of regulation.

In Australian local government, New South Wales (NSW) has a longstanding rate-pegging regime, the Northern Territory (NT) caps mining and pastoral rates and Victoria has just implemented rate-capping. In addition, recent attempts have been made to introduce rate-pegging into South Australia (SA).

This paper empirically assesses the likely impact of a rate-cap in SA local government by comparing the performance of SA with its NSW counterparts on three separate key measures (revenue effort, financial sustainability and efficiency) for the period 2013 to 2016.

The paper demonstrates that – by comparison with NSW – SA municipalities’ exhibit superior performance on these measures. The empirical evidence presented in the paper demonstrates that rate-pegging should not be imposed on SA local government and instead other more promising policies. Various policy implications flowing from these results are considered.

Dollery, B. E. and McQuestin, D. (2017), ‘No Panacea: Rate-Capping in South Australian Local Government’, Economic Analysis and Policy (in print).