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Local government funding and financing

The Productivity Commission completed its inquiry into local government funding and financing and presented its final report and recommendations to Government.

The Commission received and considered 270 submissions, held more than 75 face-to-face meetings with individuals, government and non-government organisations and firms throughout New Zealand, carried out five case studies, commissioned research and conducted in-depth analysis.

Our final report presented 78 findings and 44 recommendations.

A council building surrounded by local amenities

What did the inquiry find?

Radical reform is not required. The current rates-based system remains appropriate for New Zealand. International experience offers no clearly superior alternative.

But there are areas of significant funding pressure. These pressures are highly uneven across councils with small, rural councils serving low-income communities under particular pressure.

Targeted solutions are needed to tackle these pressures. Key recommendations include new tools to help councils fund and manage growth, and additional support from central government to help councils adapt to major pressures, such as climate change.

Councils need to lift their performance to help manage funding pressures. This includes making better use of all existing funding tools. Transparency is key, and a number of recommendations are aimed at improving the transparency of local government funding decisions and performance.

A better relationship between central and local government is essential. An agreed protocol would help end the practice of central government imposing responsibilities on local government, without appropriate funding. The Crown should also be paying for council services it receives on its properties and developments.

Regional spatial planning will better prepare councils for the future. It's a key tool for achieving more efficient use of resources, and better coordination between councils, and local and central government.

Find out more by reading the final report and summary documents:

Government response

Our final report was presented to the House of Representatives. Here is the Government's response to the inquiry and its input into the Ministerial Review into the Future for Local Government.

The Commission was an independent research and advisory body that did not have a mandate to implement any policies or programmes. However, by carrying out high quality, innovative research and evidence-based inquiries, we aimed to influence and inform policy change and decision making. 


An independent evaluation of the inquiry was undertaken to assess the Commission's performance and learn for the future. The evaluation results are available to download here: