The Government last week announced a 2-4% cap on council rate increases, slightly above its Reserve Bank inflation target of 1-3%. It’s tighter than the 5% I committed to at our recent local elections.
Cost of living remains the top concern of New Zealanders. Inflation was negligible last decade but it soared in 2020 as the previous government responded to Covid with extensive borrowing and quantitative easing (money printing). Getting inflation down from the peak of 7.3% has been painful for households and businesses but it is now down to 3%.
Government’s frustration with councils is that rate increases remain high. The latest Stats NZ inflation report highlights increases in council rates, power bills and insurance premiums.
Rates have increased nationally by 34.5% over the past three-year term – treble the 13.7% cumulative inflation rate over the same three years. Rate increases nationally this year averaged 9% compared with Nelson’s 6.5%. Our plan, to be considered by Council tomorrow, is to get it down next year to 4.7%.
The new 2-4% cap will cover general, uniform charges and targeted rates but not user charges such as those for water, transfer station waste, building consents, hall hire and pools. The cap comes into effect on 1 July 2029, but Government expects progress in taming rate increases from 2027.
I do not want our Council trying to get around the rates cap by excessively raising other charges. The work our CEO is doing to make our Council more agile and future-ready will help us meet this challenge.
We will also need Government’s help in reviewing many extra costs and regulations it has imposed over past decade that have contributed to higher rates. Examples include the big increase in Audit NZ fees, water regulations, national waste levies and temporary traffic management for road and water works.
Council does need to invest sufficiently to maintain and renew our city’s infrastructure and support city revitalisation. We also need to find efficiencies and reduce services where they do not provide value for money. The crunch will come as we develop Nelson’s next Long Term Plan for 2027-37.
