CPI-linked rate rise creates vicious cycle
By Ben Bell
LIKE many people, I tend to find that Australians are a straight-talking bunch.Read more
We appear to have a natural tendency towards calling a spade a spade regardless of whether we are engaged in a conversation with friends at the pub, negotiating to buy a used car or being pitched a business opportunity in a corporate board room.
While I am not saying such conversations may not become a little uncomfortable in some instances, most of the time the desire for a frank yet polite dialogue causes little, if any, problems.
In fact, I find our tendency for straight-talking tends to encourage open and, perhaps more importantly, genuine conversations between people.
Perhaps the only time we readily accept (or expect) stretching of the truth is from recreational anglers after a day of fishing.
For some reason, that monster fish they caught always finds a way to spit out the hook just metres from the boat … but I digress.
For that reason, whenever we find ourselves in situations where one or more people are trying to either shut down a conversation or manipulate it in some way, it seems that our natural inclination is to become suspicious or, at the very least, doubt what we are being told.
Similarly, ‘fairness’ is a value that appears to strongly underpin what it means to be Australian.
Many of us still remember the infamous 1981 Trevor Chappell cricket underarm bowling incident purely because it went against the so-called ‘Australian way’.
Play hard but play fair is the mantra of many Australian sporting teams, and those sportsmen and women who breach this fair play value tend to find themselves in the social wilderness very quickly (think Essendon Football Club’s James Hird, for example).
So, given that the concept of fairness appears ingrained in all of us from a young age, when I heard that Shire of Toodyay rates are destined to go up by 2.2 per cent this year, I naturally would have expected that the pain of this rate rise what have been felt equally across the community.
Alas, this is not the case.
According to numbers released by the shire last month, residents in communities such as Julimar, Morangup and Hoddys Well will all be hit this year with a rate rise of 3.4 per cent.
Likewise, people living in and around the Toodyay township itself should expect their rates to rise by around 2.6 per cent from next month.
In contrast, there are some in Toodyay including – I would suggest – a number of councillors who because of the differential nature of the rate scheme passed by the council last month will see their rates rise by a relatively modest 0.6 per cent.
In fact, it would be accurate to say that the only people in Toodyay whose rates will rise by the headline figure of 2.2 per cent this year are those operating businesses within the shire.
At the end of the day though, it is up to the Toodyay community to determine whether this differential rate system is fair.
I of course have my own views but, as your councillor, my role in this instance is to ensure that I communicate the appropriate information to you in the clearest and most concise manner possible and then represent your views to the council.
In line with this, I note the term CPI or Consumer Price Index is being bandied around a bit at present, particularly in reference to budgets and the shire’s corresponding proposed rate rises.
The premise underpinning this year’s proposed rate rise of 2.2 per cent is so that the shire’s rates income keeps pace with inflation.
The problem I have with this statement is that 2.2 per cent CPI is the national figure, which is skewed because Sydney and Melbourne have been experiencing significant economic growth at present.
The CPI figure for Western Australia is only 0.9 per cent.
Therefore, if CPI is the benchmark that the shire wishes to use for determining rate increases, then any increase in rates beyond this 0.9 per cent cannot be considered as ‘keeping pace with inflation’.
The shire’s proposed 2.2 per cent increase is in fact above and beyond WA inflation.
So – for want of a better way of putting it – the shire is seeking this year to make a profit from you.
Linking shire rate rises to CPI increases could be considered a little disingenuous because local governments are generally unaffected by changes in CPI, which measures only the buying power of householders – hence the term ‘consumer’.
This is reflected in the composition of the basket of goods used when calculating CPI; alcohol and tobacco, clothing and footwear, food, health and personal care, education and house equipment.
One of the biggest contributors to an expected rise in this year’s CPI (inflation), according to the Australian Bureau of Statistics which is the Federal Government agency responsible for calculating CPI, is alcohol and tobacco, followed by footwear and clothing.
So, we should expect the cost of cigarettes to rise this year as well as for Bundy rum and that glass of red wine that is so perfect on a cold Toodyay winter night by the fire.
But as an indicator for any change in the cost to the shire in providing services to our community, the use of the CPI figure is arguably flawed.
One of the main components of the ‘house equipment’ sector in the CPI is council rates.
Councils put up rates, which in turn increases CPI, which leads to local governments putting up rates again to keep pace with an increasing CPI rate that they helped create in the first place.
What a vicious cycle that therefore becomes.
Earlier this year, our council received an independent report from audit company Moore Stephens which compared the amount paid by Toodyay ratepayers with people in other similar shires across WA.
The report concluded that when comparing averages, people in Toodyay paid almost 20 per cent more than in similar shires elsewhere.
It seems the shire is now asking you to pay even more in rates this year than your friends and relatives in other part of Western Australia.
The simple answer is because it can – unless, of course, the community makes its feelings known to individual councillors about the unjustifiably high rates we as a community pay.
Only then do we have a chance of not seeing rates rise to such an elevated level that people can no longer afford to live in Toodyay.