Fuel and bitumen surge squeezes SA councils; some rate rises may exceed inflation

South Australian councils are warning that soaring fuel and bitumen prices are blowing holes in budgets, with some indicating rates may need to rise above inflation this year to keep services and projects on track. Local authorities are preparing to adopt annual budgets before the start of the next financial year.

Several report budget hits of about $10,000 a week and potential cost blowouts of up to 50% on infrastructure works, driven primarily by spikes in diesel and bitumen. The state’s peak local government body said essential services such as rubbish collection have not been disrupted, but cautioned the crisis could prompt discussions about cutting other services, increasing rates or taking on more debt.

Another council said it would face “difficult financial trade-offs” if the situation is prolonged. Industry pressure is mounting too. The state’s civil contractors warned there is now a “risk to any project” running over budget and said some businesses could become insolvent under fixed-price contracts for public works.

Mount Barker District Council, one of Adelaide’s fastest-growing areas, is considering delaying some road projects while it seeks additional state and federal grant funding. A report tabled last week estimated the immediate budget impact at $40,000 to $50,000 per month and noted the supply of bitumen was “uncertain beyond one month”.

As a guide, the report said some project costs are “likely to increase by between 20% and 50%”, with a planned $2.25 million upgrade of Bollen Road in the council’s west flagged as being “subject to increases”. Phil Burton, Mount Barker’s general manager for infrastructure and the environment, said bitumen prices were having a “big impact” on road works, including some that had not yet started.

“We probably can’t commit longer term to those bitumen projects, and we’re very cognisant about starting projects that we can’t commit to finishing,” he said. If the fuel crisis persists, he estimated the hit to the council’s budget could reach $500,000 a year — about 1% of its approximately $46 million in general rates revenue.

Burton said the council is looking for efficiencies, including delaying projects “well into next year”, to keep rate increases consistent with the consumer price index. “We’ll absorb some of these costs for this current financial year,” he said, adding that the more difficult decisions will come as next year’s budget is set and the council works to keep to its CPI-linked rate strategy.

With 68 councils across the state finalising budgets in the coming months, many face similar choices: scale back services and projects, take on more debt, or move to rate increases that could exceed inflation if fuel and material costs remain elevated.