Economist warns rural NSW shires are on the verge of financial ruin
The Wool Track is a 460-kilometre road connecting Balranald to Cobar via the Central Darling Shire town of Ivanhoe. (Supplied: NSW government)
In short:
The NSW Auditor-General has warned several rural councils are facing severe financial risks.
Local leaders in the state's west fear they may follow the fate of the Central Darling Shire, which took the state government 12 years to bail out.
What's next?
A local government expert says the state government must reform the way it allocates grant funding to avoid a crisis.
For 12 long years, voters in a western NSW local government area could not cast a vote to elect a local councillor.
Menindee resident Rob Gregory remembers it as a frustrating period.
"You had zero community representation, which made communicating [with council] very, very difficult," he said.
In 2013, the Central Darling Shire Council came close to insolvency, unable to cobble together enough cash to pay its workers.
It was put into administration by the state government, and ballot-box democracy was only partially restored in late 2025.
The Community Hall in Wilcannia was a polling booth for a council election in September 2025. (ABC Broken Hill: Katherine Spackman)
Now, other remote councils are facing a similar fate.
A report in January by the NSW Auditor-General identified the Cobar and Walgett shires among 11 councils facing "severe" financial risk, citing low cash reserves and heavy reliance on government grants.
The report also listed 19 councils without enough cash to cover three months of general fund expenses — the state government's key measure of financial health.
But according to an experienced economist, that metric does not capture the full scale of the problem.
University of New England adjunct professor of economics, Joseph Drew, is one of Australia's pre-eminent scholars on the topic of local governments.
"I estimate about one third of councils aren't sustainable," Professor Drew said.
"I wouldn't be that surprised if intervention of some kind was required in the next 12 months.
"It could be up to half of them."
Intervention can mean anything from performance orders to bailouts or administration, often at a significant cost to the state government.
Councils with small rate bases often have to maintain a huge network of roads. (ABC Central West: Tim Fookes)
Professor Drew said one of the most startling things about local government finances was just how little was known about their long-term viability.
"We don't actually have a handle on the financial sustainability of our councils in New South Wales," he said.
"We don't know which one is falling over next.
"Most of our state politicians seem to have their head in the sand about the issue."
Joseph Drew says up to half of councils in NSW could become financially unviable within the next year. (ABC New England: Jennifer Ingall)
A warning from the far west
A 2014 public inquiry into the Central Darling Shire's economic crisis pointed the finger at the council's poor financial oversight and a failure to act early.
But Professor Drew said that narrative was too simple.
"The go-to is that you blame the councillors," he said.
"Sometimes they're responsible, most times they're not.
"In that particular case … councillors were saying at the inquiry they weren't getting enough grants, and they were correct.
The economist said the real issue was structural, saying that Central Darling Shire spanned more than 53,000 square kilometres, making it roughly the same size as Tasmania.
The Central Darling Shire Council is the largest local government area in NSW but has the smallest population. (ABC Broken Hill: Ben Loughran)
A population of fewer than 1,800 residents provides a small revenue pool to draw from for maintenance of things like the local road network, which covers nearly 2,400 kilometres.
State government-appointed administrator and now chair of the restored Central Darling Shire Council, Bob Stewart, said those sorts of structural problems were likely to linger.
Bob Stewart was the administrator for the Central Darling Shire for six years. (ABC Broken Hill: Bill Ormonde)
"Will we ever be financially sustainable? I would doubt it given the rate base," he said.
"We'll always depend on government grants and special allocations of funds to support the operations of councils, because we are often the service provider of last resort."
Cobar's last resort
Cobar Shire, just to the east of Central Darling, was listed by the NSW Auditor-General as one of the state's 11 "most-at-risk" councils.
According to the report, the council-operated Lilliane Brady Village, a 42-bed aged care facility, is a major source of strain on its finances.
"That, over the last couple of years, has been very expensive, but we're providing that service because we have to," the council's general manager, Peter Vlatko, said.
Lilliane Brady Village aged care facility is in Cobar, NSW. (Supplied: Cobar Shire Council)
"If somebody else wants to take it over, so be it, we've got no problems with that.
"The difficulty is it's not something anyone's knocking down doors to take over."
Lifelong Cobar resident Linda Carter was a nurse at the village for 10 years.
She said any talk of the council closing the facility would be "extremely emotional … because the oldies in town [used to have] nowhere to go when they got old and sick".
"A lot were sent out of town to other nursing homes, so when they'd die, they'd die without their families next to them," she said.
"No-one wants to go back to that."
The village charges an initial deposit for entry, ranging from $201,000 to $380,000, and a daily care fee indexed to 85 per cent of the age pension, which is about $71.56 a day.
Cobar Shire Council loses about $1.4 million a year keeping the facility open.
Linda Carter says all Australians should have the right to grow old and die near their hometown. (Supplied: Linda Carter)
Cobar's large, and still growing, mining industry has an estimated annual economic output of $1.9 billion, according to an analysis by economic consultants REMPLAN.
But Mr Vlatko said the royalties paid by mining companies went to the state government.
"We used to get a proportion of that back to our community, but that no longer exists," he said.
'Ever-increasing' reliance on grants
In the state's far north, Walgett Shire general manager Andrew Brown said the council received about $11 million a year in rates, fees and charges.
"Our staff costs are around about $13 million, so I'm already in the red before I even switch on the lights," he said.
Andrew Brown says councils across the state are struggling to balance fiscal responsibility with the delivery of services. (Supplied: Walgett Shire Council)
Walgett receives about $7 million annually from the federal government's Financial Assistance Grant scheme — one of the only recurring funding streams councils can rely on.
Most other grants are delivered as one-offs for individual projects.
"If we get a grant to build a new park, seal a new road, whatever it might be, then the ongoing cost of [maintaining] that falls out of council's rates,"Mr Brown said.
"What we need is a recurring operating grant so that we can spend that money on maintenance and renewals, rather than letting assets completely fall apart before we can apply for a grant to replace them."
Sources of strain on the council's budget include an Australia Post office in Collarenabri, and a Services Australia centre at Lightning Ridge.
The council took over both as the provider of last resort.
It also operates four swimming pools, and subsidises a fifth, racking up a recurring deficit of about $2.5 million per year.
"It's an hour's drive between each pool," Mr Brown said.
"You drive round Sydney and every five minutes you'll come across a swimming pool.
"Swimming pools are not just recreational facilities, they're hubs that build social cohesion."
The Walgett pool is seen as a lifeline for families. (ABC Western Plains: Catherine James)
Mr Brown said the council was reluctant to apply for a special rate variation in an area with a low socio-economic base.
"We are working really hard on this, but we do not want to cut services," he said.
"This community deserves better than service cuts.
"But of course, that may end up being the only option we have."
System under strain
Professor Drew said rural councils with small or declining populations, high infrastructure burdens, and low revenue were being slowly marched toward a financial cliff.
"The grant system in Australia is backed up by federal legislation … which means that every council ought to have sufficient funds to provide the basics," he said.
"If that was done right, we would see that councils such as Central Darling Shire would have the same sort of basic levels of services … as you would find in North Sydney or Bayside."
Professor Drew said it was obvious that the system was not working.
"We have a piece of federal legislation that says that if you're in a high need area, low revenue capacity area, you ought to be getting more grants," he said.
"You've only got to drive around Wilcannia with your eyes open to discover that's not actually the case."