The 1990s witnessed a major era of structural reform in Australian local government. Amalgamation programmes in all six states resulted in a substantial decrease in the number of local authorities in Australia. The chief rationale underlying local government mergers lay apparently in the belief that larger municipalities would exhibit greater economic efficiencies. Despite its widespread acceptance amongst policy elites, this argument did not derive from a solid empirical base. This article seeks to evaluate available research evidence on the controversial question of economies of scale in Australian local government.

The past few decades have witnessed a significant transformation in the composition of Australian local government service provision away from its traditional narrow emphasis on ‘services to property’ towards a broader ‘services to people’ approach. This process has occurred by default in an ad hoc incremental manner with virtually no debate on the changing role of local councils, unlike the New Zealand experience where a similar transition in service delivery generated public debate. In an effort to stimulate a ‘debate that had to happen but never did’, this paper seeks to establish whether a significant shift in the service mix of Australian municipalities has indeed taken place and then evaluates three stylized models of local government that could be adopted in Australia: minimalist councils; optimalist councils; and maximalist councils.

Local government in advanced economies is undergoing a period of rapid reform aimed at enhancing its efficiency and effectiveness. Accordingly, the definition, measurement and improvement of organisational performance is crucial. Despite the importance of efficiency measurement in local government it is only relatively recently that econometric and mathematical frontier techniques have been applied to local public services. This paper attempts to provide a synoptic survey of the comparatively few empirical analyses of efficiency measurement in local government. We examine both the measurement of inefficiency in local public services and the determinants of local public sector efficiency. The implications of efficiency measurement for practitioners in local government are examined by way of conclusion.