Rates should continue to be the main source of funding for local government, but they need to be bolstered by additional revenue streams, especially in cities experiencing rapid growth, says the Productivity Commission.

Its draft report into local government funding and financing, released yesterday, is unpersuaded by one of the premises underlying the Government's commission to undertake this inquiry: that rates have become increasingly burdensome, outpacing rises in incomes and in the costs local governments face.

On average across all local authorities, rates provide 47 per cent of revenue, supplemented mainly by grants from central government especially for roading


Main sources of local authority funding: