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Local councils call for funds lifeline after disasters

Councils across Australia are calling on the federal government to live up to an election promise of more funding as many rural areas "rob Peter to pay Paul" to avoid raising rates.

The Australian Local Government Association wants the Commonwealth to increase financial assistance grants for the nation's 537 local councils in its May budget.

"Australian councils are facing significant financial challenges, especially in the wake of recent natural disasters," the association's president Linda Scott said.

Councils will receive $2.9 billion in grants in 2022-23, about 0.52 per cent of taxation revenue, but the association wants the level restored to the 1996 rate of one per cent.

The grants provide untied funds, allowing councils to spend the money where it is most needed.

"Inadequate funding of local government places an unfair and inequitable financial burden on local communities and frustrates their realistic needs, priorities and expectations," the association's pre-budget submission said.

Labor's national policy platform promised "fair increases" to the grants.

Phyllis Miller, the mayor of Forbes in central west NSW, said local councils have been chronically underfunded.

"We rob Peter to pay Paul right across sectors and it's quite difficult," Ms Miller said.

"We're always looking at our budgets and going 'we can do that this year, but we'll have to wait three years for that'."

Ms Miller said flood-affected councils including Forbes do not want to be forced to raise rates while their communities recover.

"We've got people displaced," she said.

"It's really difficult for all of us that have suffered terrible natural disasters."