Public Finance and Management ISSN 1523-9721 Volume 13, Number 3, pp. 215-238 2013 AN EVALUATION OF AMALGAMATION AND FINANCIAL VIABILITY IN AUSTRALIAN LOCAL GOVERNMENT Brian Dollery University of New England, Australia Bligh Grant University of New England, Australia and Australian Centre for Excellence for Local Government, Australia Michael Kortt Southern Cross University, Australia ABSTRACT Like numerous other local government systems in developed countries, Australian local government confronts daunting financial problems, perhaps most acutely evident in the emer- gence of a severe backlog in local infrastructure maintenance and renewal. Australian local government policy makers have relied to an unusual and extreme degree on compulsory coun- cil consolidation as the main policy instrument to tackle the financial crisis. This paper sets out the dimensions of the financial crisis and the attendant heavy reliance on forced amal- gamation and then goes to consider the efficacy of compulsory council consolidation as a means of improving financial viability in Australian local government through the prism pro- vided by eight national and state-based public inquiries into financial sustainability in local government over the past decade. With one exception, these inquiries are skeptical of the abil- ity of forced amalgamation to improve local authority financial viability. 1. INTRODUCTION In common with its counterparts in many other advanced nations, Austral- ian local government has faced a bracing bout of vigorous reform for more than two decades (see, for example, Dollery, Garcea and Le Sage, 2008; Dollery, Grant and Kortt, 2012). In essence, Australian state and territory gov- ernment policy makers have deployed three main policy instruments in pursuit of reform objectives. In the first place, state and territory Departments of Lo- cal Government have attempted to enhance the operating efficiency of local government by modernizing the various Local Government Acts on the as- sumption that greater legislative latitude would enable local councils to adapt more rapidly to changing circumstances. The conceptual basis for this policy presumption derives from New Public Management (NPM) which stresses the importance of giving local authorities the ‘freedom to manage’, as well as the