Rate rises on the horizon for Tamworth Regional Council ratepayers if Independent Pricing and Regulatory Tribunal review brings inflation into rate cap rules

That's the judgement of Tamworth Regional Residents and Ratepayers Association vice president David McKinnon.

The Independent Pricing and Regulatory Tribunal announced on Tuesday that it will review the rate cap system that it operates.

The review will investigate how the methodology it uses to judge how much rates can increase, can better reflect inflation. At the moment, the decision can be based on cost increase estimates up to two years out of date.

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With inflation forecast to be on the rise, Mr McKinnon said that sort of change would guarantee a rate rise.

He said there was a sort of "folly" attached to the rate peg system, because councils always get special rate variations.

"The rate pegging at the moment seems to be quite flexible when they can increase it by a simple request," he said.

The ratepayers' group will be making a submission to the public comment section of the review, he said.

Mr McKinnon said he'd like to see councils talk about how they plan to "rein in spending" at the same time as loosening the reins on rates.

"We never hear any efforts that they make to try and alleviate rate rises. They simply ask for them, they get them, they'll support them frantically; when this matter goes through, they'll be championing them," he said.

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"Where the public of course have to be more conservative and more careful with spending, if the rates rise and of course they will, but you never see council doing the same thing."

Years of criticism of the system by councils escalated after IPART announced it had capped rate rises at 0.7 per cent for 2022/23, the lowest rate rise in 20 years during the highest increase in prices in decades.

Tamworth mayor Russell Webb said the decision proved the model was flawed.

"There definitely needs to be some changes made to the way they determine those outcomes," he said.

"The last round created a lot of discontent and a lot of work for just about every council in NSW, to try and get themselves back into a situation where they weren't going to be either running deficit budgets, or weren't going to be able to operate and provide the services that they normally provide."

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Local Government NSW (LGNSW) welcomed what it called a "long-awaited review" with open arms.

LGNSW President Darriea Turley said the review would provide "the opportunity to closely examine how the rate peg is calculated and what improvements could be made to prevent future financial shocks to the local government sector".

"Councils are determined to keep rates as low as possible, but we are also required to deliver services and infrastructure that our communities expect and deserve. We simply cannot do this with a system that appears to be incapable of pre-empting or reacting to a rapidly changing economic landscape," she said.

IPART has been setting the rate peg for councils across NSW since 2010. The current methodology includes the change in costs for the state's councils. For the first time ever IPART also considered population growth when determining rate caps for 2022/23.

IPART expects to publish an issues paper and call for the first round of submissions on 27 September, 2022. A draft report is due to be completed by February next year, and there will be public hearings about the prospective change in March.

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