1. INTRODUCTION AND RECOMMENDATIONS
1.1 The New Zealand Initiative (the Initiative) is a Wellington-based think tank supported primarily by chief executives of major New Zealand businesses. In combination, our members employ more than 100,000 people. We conduct research and advocate for public policy that contributes to a more prosperous, free, and fair New Zealand.
1.2 This submission responds to the Local Government (Rates Capping) Amendment Bill (the Bill). It builds on the Initiative’s February 2026 submission to the Department of Internal Affairs (DIA) on the consultation that preceded the Bill.1
1.3 The Initiative recommends that the Bill not proceed. It misdiagnoses the problem, does not adequately justify the target range and imposes a floor that can require rates to rise. The Australian experience provides substantial grounds for concern. The Bill also weakens local accountability and poses economic and fiscal risks. Sections 2 to 7 address these concerns.
1.4 The Government should instead pursue the following approaches to fiscal discipline and funding reform, discussed in section 8:
- Monitor the impact of the Local Government (System Improvements) Amendment Act 2026 on council spending, service delivery and rates;
- Introduce standardised spending and performance reporting with meaningful benchmarking;
- Require binding ratepayer referendums for major discretionary spending projects and enable binding approval of targeted rates by those who would pay;
- Fund additional central government mandates and review existing requirements for unnecessary costs; and
- Broaden council funding tools, including shares of GST on new construction and minerals royalties, accommodation levies and the removal of unjustified rates exemptions on Crown land.
1.5 The Initiative wishes to appear before the Committee in support of this submission.
