Council Reference Group Communique #3 2026
The Council Reference Group (CRG) met on 11 August 2026 to discuss the remaining issues it proposed the Tribunal consider for the 2027-28 rate peg.
The CRG focused on cybersecurity, labour costs, Microsoft licensing costs, animal management, inflation and fuel costs, Financial Assistance Grants and climate adaptation costs as set out below.
Cybersecurity costs: The Centre for International Economics (CIE) presented on the summary of survey data recently completed by councils regarding cybersecurity costs. Survey results indicated cybersecurity spending has been increasing across councils and that higher levels of cyber maturity are associated with greater expenditure.
CIE also presented on potential rate peg adjustment options for the typical annual cost of cybersecurity that meets foundational requirements. There was broad support for recognising cybersecurity as an ongoing operational requirement, and for a rate peg adjustment, rather than through alternative options such as special variations to fund individual council cybersecurity expenditure.
The Audit Office of NSW has identified the need for the local government sector to improve its cybersecurity position. The Audit Office may raise non compliances on councils that do not comply.
The CRG generally supported the principle of a different adjustment across the different council area classifications, which provides greater support for smaller rural councils. However, some concerns were raised about the ability of smaller rural councils to attract specialised resources and manage necessary investments. The CRG also discussed how councils operate across diverse and different systems, which presents risks, and cybersecurity will be an ongoing cost that will require continued investment.
Further work will be undertaken on the potential options and how the costs are allocated across the councils’ services.
Labour costs and skills shortages: A CRG member presented on a recent workforce costs survey conducted by the Country Mayors Association across its member councils to understand workforce shortages and employment cost pressures in rural and regional NSW. Survey responses indicated that most surveyed councils had experienced wage increases above the Award, generally ranging between 1% and 10%, with additional expenditure arising from recruitment incentives and employment benefits.
CRG members discussed difficulties attracting and retaining staff across a range of occupations, including engineers, planners, machinery operators and professional staff. Factors identified included competition from major infrastructure projects, housing availability, labour market pressures and government policy initiatives.
CRG members supported further research to better understand these pressures and their financial impacts, across all NSW councils, including a broader survey of all councils.
Microsoft licensing costs: The CRG considered the impact of rising Microsoft licensing costs. It was noted that councils are increasingly dependent on integrated software platforms and that costs are growing through both price increases and wider adoption of new products and services.
CRG members discussed recent licence renewals that had resulted in significant increases for some councils and noted the emergence of additional costs associated with artificial intelligence tools as well as their benefits.
The CRG also discussed the challenge of determining whether these costs are already reflected in inflation measures.
CRG members agreed that there is not yet sufficient evidence to support a separate adjustment and that the issue should continue to be monitored through further data collection and analysis.
Animal management costs: A CRG member presented on costs associated with animal management and pound services. Discussion focused on legislative changes affecting rehoming requirements, longer holding periods for animals, and rising operational costs.
CRG members noted that expenditure growth appears to be influenced by multiple factors, including regulatory requirements, council decisions, animal welfare expectations and increasing numbers of animals requiring care.
The CRG recognised the complexity of separating legislative impacts from council service choices and community expectations. CRG members agreed that additional monitoring and analysis are required before any recommendation could be considered.
Inflation catch-up and fuel costs: The CRG revisited previous discussion on inflation catch-up and fuel costs.
CRG members considered options including inflation catch-up mechanisms, temporary fuel‑related adjustments and continuing to rely on forward-looking inflation forecasts. It was noted that introducing retrospective adjustments would add complexity and potentially reintroduce issues associated with previous methodologies, such as a timing lag.
The general view of the CRG was that the existing forward-looking approach should be maintained and that inflation forecasts remain the preferred mechanism for dealing with broad-based cost movements. CRG members agreed that fuel costs and other inflation-related issues should continue to be monitored.
Financial Assistance Grant payment reductions: ACRG member presented a summary of Financial Assistance Grant payments that their council received over the last 15 years. It was noted that grant funding on a per-capita basis for the council had declined over time.
CRG members observed that experiences may vary across different council categories and regions. The analysis was received as useful background information and the issue will continue to be monitored.
Climate adaptation costs: The CRG considered emerging financial pressures associated with climate adaptation and resilience.
Discussion covered risks associated with extreme heat, flooding, disaster response, asset protection and community resilience initiatives. CRG members noted that climate-related impacts and required responses vary significantly between councils depending on geography, development patterns and local risks.
The CRG acknowledged that climate adaptation represents a significant long-term issue for local government, but that further analytical work is required to determine how these costs might be considered within the rate peg framework.
CRG members supported continuing to examine this issue.
Next steps
IPART thanked CRG members for their contributions and presentations.
The CRG agreed to continue work on several emerging issues outside the formal meeting cycle, including workforce cost pressures, Microsoft licensing costs and climate adaptation costs.
See: Meeting Agenda
Council Reference Group members and attendees
In attendance at the Council Reference Group meeting on 11 August 2026:
- Andrew Butcher, President, NSW Revenue Professionals
- Daniel Pretzler, Chair of the Finance Professionals Member Network (in part)
- David Reynolds, CEO, Local Government NSW
- Fernanda Maruyama, Bayside Council (in place of Richard Sheridan)
- George Cowan, Individual, former General Manager, Narrandera Shire Council
- Glen Magus, Director of Corporate Services, Hornsby Council
- Julie Briggs, Policy Advisor, Country Mayors Association of NSW
- Michael Chorlton, Director Corporate Services, Tweed Shire Council
- Richard Sheridan, Director City Performance, Bayside Council (in part)
- Seon Millsteed, Revenue Accountant, Tamworth Regional Council
- Shairoz Aurora, OLG (in place of Ritika Sehgal)
- Shaun McBride, Chief Economist, Local Government NSW
- Sonya Kenny, Principal Policy Officer, OLG (in part)
- Wayne Rogers, Director Corporate Services, Blacktown City Council