The Productivity Commission says NSW’s rate pegging system is holding the state back.

The Commission’s review of infrastructure contributions found rate pegging is “a disincentive to development and growth”, and that NSW lags significantly behind other states when it comes to the provision of vital local community infrastructure.

The report found average NSW council rates were $591 per capita in 2019, compared to an average of $835 for all other states.

Local Government NSW (LGNSW) President Linda Scott says the “antiquated” system has to be replaced.

“Our communities right across NSW are missing out on good local roads, footpaths, sports facilities, parks, and all the other infrastructure and service components they need,” Cr Scott says.

“If councils have insufficient funding to keep local infrastructure such as roads in shape, we all suffer – through increased congestion, lower productivity and a worse quality of life for everyone.

“The Productivity Commission is just the latest to join LGNSW and a wide range of bodies disturbed at the choke-hold this practice has on our standard of living.”

The Commission’s Review says rate pegging forces councils to reduce the quality and quantity of infrastructure to service their communities or recover the cost from infrastructure contributions.

Yet developer contributions currently cover “cover only a small proportion of the required funding and fail to deliver services in a timely and coordinated way”, the review found.

Cr Scott says reform needs to go further than simply “streamlining” the developer contribution system.

“There’s no use attracting tens of millions of dollars of developer investment in the community through changes to the system if councils are left having to build supporting footpaths, parks and roads without enough money to do so,” she said.

“We are on the same page when it comes to supporting economic growth, and we look forward to working with the Government and its agencies to deliver that growth through effective services and infrastructure which underpins our quality of life.”