COUNCIL rates will rise by no more than 2.75 per cent in the next financial year, following a decision by the state government aimed at easing cost-of-living pressures for households.
The cap, announced on 23 December by Local Government Minister Nick Staikos, will be lowered from the current three per cent cap.
This is based on the forecast consumer price index, which limits how much councils can increase their total revenue from general rates and municipal charges in 2026–27.
The decision falls under the Fair Go Rates system, which links annual rate increases to inflation. The cap was set after advice from the Essential Services Commission and applies to all Victorian councils, unless special approval is granted.
While welcomed by ratepayers, the cap is expected to further strain council budgets as local governments grapple with rising costs for construction, wages and essential services.
Alongside the rate cap, councils have been issued with updated guidelines on waste management charges, responding to increasing waste levies across the state.
The new Minister’s Good Practice Guidelines for Service Rates and Charges are designed to improve transparency and ensure residents are not overcharged for kerbside waste and recycling services.
Under the guidelines, councils must ensure waste charges reflect the actual cost of providing the service, including collection, transport, processing and disposal. Charges should not be used to generate surplus revenue.
The government said the combined measures strike a balance between supporting households and allowing councils to continue delivering local services.
Before the Fair Go Rates system was introduced in 2016, council rates were rising by an average of about six per cent a year. Since then, the average annual cap has been around 2.3 per cent, significantly slowing the pace of increases.
Councils can still apply to the Essential Services Commission for permission to exceed the cap if they can demonstrate a critical need for additional funding to deliver services or major projects.
Staikos said the cap had made a “real difference” to household budgets, adding that next year’s increase would again align with inflation. He also said the new waste charge guidelines would help ensure fees better reflected real costs and were more consistent across councils.
The Mornington Peninsula Shire has applied the rate cap of three per cent for the 2025-26 financial year.
During their election campaign, both the mayor Cr Anthony Marsh and deputy mayor Cr Paul Pingiaro pushed for a rates freeze, with the focus returning to core services and eliminating unnecessary spending.
“The three percent cap is the maximum increase allowed, but of course, that doesn’t mean we must lift our rates by three percent,” Marsh told The News last January (Council rate cap set, The News 7/1/25).
Last November, Pingiaro said the council would not exceed the state’s three per cent rate cap or future rate caps, after cutting its ten-year projected deficit from $296m to $3m.
At the time he said the plan would not involve rate rises above the rate cap nor cuts to core community services “whatsoever”.
“Rate capping is set by the state each year. We work on the assumption that the rate cap will be between 2.5 per cent and three per cent.”
First published in the Mornington News – 13 January 2026