Although the assumptions listed in the previous section are our current informed estimate based on a range of reliable sources, long term financial plans are inherently uncertain. They contain a wide range of assumptions, including assumptions about interest rates and the potential effect of inflation on revenues and expenditures which are largely outside our control.
Developing our Long Term Financial Plan has included financial modelling taking into account the impact on our finances if trends worsen.
Rates
Rates comprise 43% of our total income. Rates are capped by the State Government and we can only increase rates if we apply for a special increase. If rates are held 0.5% pa below the Consumer Price Index the budget will still remain in surplus for each year of the Long Term Financial Plan.
Employee costs
Salary growth is largely subject to the NSW Local Government Award. The current Award includes an increase of 2.7% for the current year and 2.8% for 2016/17 before step increases. If the Award increase was 0.5% pa higher the budget would still remain in surplus for each year of the Long Term Financial Plan.
Materials, contracts and other expenses
While our budget shows we are in a good financial position, fluctuating market conditions could affect the price of certain Materials and Contracts. The chart shows the impact of a 0.5% pa increase in Material, Contracts and Other Expenses above the Consumer Price Index. Significant increases are possible, for example electricity costs. The budget would still remain in surplus for each year of the Long Term Financial Plan.
Combined impact
The chart shows the combined impact of factors discussed above and would see the budget fall into deficit from 2020/21.