In the 2019-2022 term – when many councils were facing unexpected costs and revenue losses because of the Covid-19 pandemic – average rates increased 18.4%.
Reserve Bank chief economist Paul Conway said the rates spike had affected headline inflation and in turn, the Official Cash Rate and interest rates.
“It’s just maths. If you take things out of the CPI [Consumers Price Index] basket that went up quite strongly, then overall inflation is a bit lower, meaning less inflation pressures, less persistence and lower interest rates,” Conway said.
“Administered prices and fiscal support from Covid were slow to come out of the system, which meant interest rates were higher than they otherwise would have been over that period.”
Former interim Reserve Bank Governor Christian Hawkesby – speaking before his exit last Friday – said recent increases were an “echo” of previous years, when inflation was high and rates increases had been more moderate.
Infometrics research, commissioned by Local Government New Zealand last year, found the cost of building bridges had gone up by 38% between 2021 and 2024.
The cost of sewerage systems had gone up by 30% and the cost of roads and water supply systems had both gone up by 27%.
However, Prime Minister Christopher Luxon – who earlier this week confirmed plans to cap future rates rises – said the scale of rates hikes was still avoidable, despite the rising costs.
“Households have been managing that, businesses have been managing that, central Government has actually lowered taxes and councils are still growing their rates.
“Think about the superannuitant who’s on a fixed income. Think about the young people how have actually stretched into a big house and a big mortgage and now can’t afford the rates bill.”
Last year, some parts of the country saw very significant rates increases, with Gore’s local rates going up an immediate 21.4% and the West Coast’s regional rates increasing by an immediate 27%.
In Greater Wellington, Upper Hutt rates went up 19.93%, Wellington City rates went up 18.5% and Porirua rates went up 17.5%, on top of a 20.55% rise in regional rates.
The Government has announced plans for a major overhaul of the 1989 local government system that would abolish regional councillors and see some councils potentially amalgamated.
It has been facing strong opposition from some council leaders since suggesting rates rise caps and restrictions on non-core spending earlier this year.
Michael Sergel is Newstalk ZB’s business reporter, covering the daily life of business and the business of daily life. He’s been covering business, politics, local government and consumer affairs for over a decade.
