The rates cap, explained — and what ten years of it has actually done.

Rates are the most-discussed and least-understood line item in local government. Almost everyone has an opinion about them. Very few people — and I include plenty of candidates in this — can explain what the rate cap actually caps.

So this is the explainer. It is not an argument for a party. It's an attempt to lay out the mechanism, the numbers, and the trade-off honestly enough that you can form your own view.

01 / The mechanismWhat the Fair Go Rates System does.

Rate capping began in Victoria on 1 July 2016. Each year, the Minister for Local Government sets an average rate cap, acting on advice from the Essential Services Commission. The cap is set with reference to forecast Consumer Price Index — so in effect it ties council rate growth to inflation.

Critically, the cap applies to the total revenue a council raises from general rates and municipal charges. It does not apply to your individual rates notice. That single distinction is the source of most of the confusion and most of the anger.

Figure 01 · What's in and what's out

The cap covers less than most people assume.

Inside the cap

Capped

• General rates — the main property-value-based charge
• Municipal charges — the flat per-property component
• Measured as total council revenue from those sources, not per household

Outside the cap

Not capped

• Waste and service charges — kerbside collection and recycling
• The state Emergency Services and Volunteers Fund — a state levy councils collect on the state's behalf
• Special rates and charges for specific schemes
• Fees for services — permits, leisure centres, parking

This is why a resident can receive a notice showing a total increase well above the cap while the council has fully complied. The uncapped components sit on the same piece of paper as the capped ones.

02 / The numbersEvery cap since capping began.

Figure 02 · Victorian average rate caps

Eleven years of caps, and the decade before them.

Pre-2016 avg ~6.0%

2016–17 2.50%

2017–18 2.00%

2018–19 2.25%

2019–20 2.50%

2020–21 2.00%

2021–22 1.50%

2022–23 1.75%

2023–24 3.50%

2024–25 2.75%

2025–26 3.00%

2026–27 2.75%

Average annual increase in the decade before capping Legislated average rate cap

Caps apply to all Victorian councils including Greater Geelong. The state government reports that in the decade before the Fair Go Rates System, council rates were rising by an average of about 6 per cent a year, and that the average cap from 2016–17 to 2025–26 has been about 2.3 per cent. The 2026–27 cap of 2.75 per cent was announced in January 2026.

The shape of that chart tells a story. The tightest years were 2021–22 and 2022–23, at 1.5 and 1.75 per cent — caps set against pre-inflation CPI forecasts, which then landed in the middle of the sharpest construction and wage cost increases in decades. Councils entered a cost spike carrying revenue growth set for a low-inflation world.

03 / CompoundingThe part that actually matters.

Annual percentages don't feel like much. Compounded over a decade they're the whole story.

Figure 03 · Ten years, compounded

Capped versus the previous trajectory.

+26.4%

Compounded effect of the actual caps, 2016–17 to 2025–26

+79.1%

Compounded effect of a decade at the pre-cap average of 6% a year

~53pts

The difference the cap made across ten years

Calculated by compounding the published annual caps, and comparing against ten successive years at 6 per cent. This is arithmetic on the caps themselves, not a measurement of any individual council's actual revenue — councils may also raise revenue from new properties added to the rate base, which is treated separately from the cap.

That's a genuine cost-of-living achievement, and anyone who dismisses it isn't being straight. Ratepayers in 2026 are paying substantially less in general rates than they would have on the previous trajectory.

It is also, unavoidably, about 53 percentage points of revenue that councils no longer have.

04 / Why your bill went up anywayFour legitimate reasons.

"The cap was 2.75 per cent but my rates went up more than that" is one of the most common complaints in local government — and in most cases nothing improper has happened.

Figure 04 · Where the increase comes from

Four ways a bill outpaces the cap.

REASON 01 Your property was revalued upward faster than the average All properties are revalued annually. The cap fixes the total pool the council collects; valuations determine how that pool is divided. If your property rose in value faster than the municipal average, your share of an unchanged pool rises. Someone else's falls.

↓

REASON 02 The waste charge went up Waste and service charges sit outside the cap. State landfill levies and processing costs have risen sharply, and those flow through. The state has issued new guidelines aimed at making these charges more transparent and better matched to actual cost.

↓

REASON 03 The state Emergency Services and Volunteers Fund This is a state levy that appears on your council rates notice because councils collect it on the state's behalf. It is not council revenue, and it is not subject to the council rate cap. Many residents reasonably assume it's a council charge because of where it's printed.

↓

REASON 04 The council obtained an approved higher cap Councils may apply to the Essential Services Commission for a cap above the standard rate. There have been around 19 such applications since 2016–17 — for example, Hepburn Shire was approved for 10 per cent and Indigo Shire for 7.54 per cent in 2025–26. It's the exception, and it requires a demonstrated case.

05 / The trade-offBoth sides of this are real.

Here's where I'll be direct, because I think most political commentary on rates picks one half of the argument and pretends the other doesn't exist.

Figure 05 · The honest ledger

What capping delivered, and what it cost.

The case for capping	The case against
Rates were rising at roughly double inflation before 2016. Capping stopped a compounding cost-of-living pressure that households had no way to opt out of.	Council input costs — construction, materials, insurance, wages — have risen faster than CPI for much of the capped period. Tying revenue to CPI while costs run ahead of it produces a structural squeeze.
It forced genuine efficiency work: restructures, shared procurement, asset sales, smaller vehicle fleets. Some of that was overdue.	The peak local government body has pointed to emerging evidence of under-investment in capital infrastructure, and councils dropping discretionary community services to balance budgets.
Rates are a compulsory charge on property, not a market price. A brake on compulsory charges is defensible on principle.	Deferred maintenance is not a saving — it's a delayed and usually larger bill. Roads, drains, pools and pavilions don't stop ageing because revenue was capped.
The exemption process exists: councils with a demonstrable case can apply for a higher cap and some have succeeded.	Applying for a higher cap is politically costly, which means the mechanism is under-used relative to actual need.

Reasonable people land on different sides of this. What isn't reasonable is claiming there's no trade-off at all.

Deferred maintenance isn't a saving. It's a bill you've handed to whoever is on council in ten years, with interest, and without the political cost of having raised it yourself. — David Greenwood OAM

06 / What I thinkWhere I actually land.

I support the cap. Households can't absorb 6 per cent compounding forever, and the discipline it imposed on councils was, in a lot of cases, necessary.

But I don't think you can support the cap and then be silent about the consequences. Three things follow from it, and a candidate who won't say them is dodging:

Figure 06 · What follows from supporting the cap

Three obligations.

Ruthless prioritisation

Under a cap, every new project displaces something else. Councils owe residents honesty about what got deferred to fund what was announced — not a list of wins with the trade-offs left out.

Asset renewal first

Maintaining what exists has to beat building something new with a ribbon attached. That is a much harder political discipline than it sounds, and it is where capped councils either hold the line or quietly fail.

Transparency on the whole bill

Residents deserve a rates notice that clearly separates council general rates, council waste charges, and the state levy — so anger lands where the decision was actually made.

And one more, which is really the argument I keep coming back to: under a cap, where the money goes matters more than ever. When the pool is growing at CPI, the question stops being "how much do we raise" and becomes "how fairly is it distributed". A capped council that spends unevenly across its wards is making a much more consequential choice than an uncapped one that spends unevenly, because there's no growth to smooth it over.

That's why I keep arguing for ward-level reporting of capital and operational spend. Under a cap, opacity about distribution isn't a minor governance gap. It's the whole game.

07 / Reading your own noticeFour things to check.

Figure 07 · Your rates notice

How to work out what actually changed.

On the notice itself

• Your property valuation — and how it changed from last year
• The general rates line — this is the capped component
• The waste / service charge — not capped
• The state emergency services levy — not council revenue at all

If it still doesn't add up

• Compare the general rates line only, year to year — that's the fair comparison to the cap
• Check your valuation objection rights — there's a limited window and it's on the notice
• Ask for a breakdown from the council's rates team; they're obliged to explain it
• Ask about hardship provisions if paying is genuinely difficult — they exist and are under-used

If you're in financial difficulty, contact the council's rates team early rather than late. Payment arrangements and hardship provisions are far easier to access before arrears accumulate.

One thing I'd genuinely like help with. I'm interested in what Greater Geelong's actual year-by-year rate increases have been — not the state-wide caps, but this council's own decisions, including the pre-2016 years. Those figures live in council annual reports and budget papers. If you have a background in local government finance and would like to help compile and verify a proper twenty-year Geelong series, I'd like to publish it here with the sources shown. Email david@centrestage.org.au with "Rates data" in the subject.