19 Jun The Quiet Squeeze: Why the next funding round will be won before it opens?

Why should councils prepare before funding rounds open? 

Councils that wait for grant guidelines to be released before preparing their funding submissions are already behind. 

Competitive funding rounds are becoming more heavily contested, while the financial pressure on Australian local government is becoming more structural than cyclical. United funding has not kept pace with community needs. Own-source revenue is constrained. Cost shifting continues to absorb local budgets. At the same time, councils are increasingly expected to use competitive grants to deliver the infrastructure, services and investment priorities their communities expect. 

In this environment, successful funding applications are rarely built in the six weeks after a round opens. They are built months earlier, through strategic planning, investment logic, economic evidence and business case development. 

That is the work that turns a project from an idea into an investment-ready proposition. 

What is putting pressure on council funding? 

Australian councils are operating in a constrained funding environment. 

Federal Financial Assistance Grants, the single largest untied revenue source flowing from the Commonwealth to local government, have halved as a share of Commonwealth taxation revenue since 1996, from 1 per cent to around 0.5 per cent. In 2025-26, they total $3.45 billion. ALGA’s modelling suggests restoring them to the historic 1 per cent benchmark would deliver a $1.42 billion cumulative GDP benefit and around 4,000 jobs. 

At the state level, the picture is no easier. The 2025 LGNSW Cost Shifting Report found NSW councils are absorbing $1.5 billion in cost shifting from state and federal governments every year. That represents a 10 per cent increase on the 2021-22 figure and a cumulative $11.3 billion over the past decade. 

Revenue settings also remain tight. Victorian councils enter 2025-26 with a 2.75 per cent rate cap, while NSW councils face a rate peg between 3.6 and 5.1 per cent. Queensland councils are competing for $115 million over four years through the 2024-28 Local Government Grants and Subsidies Program, a meaningful allocation in headline terms, but modest when spread across 77 councils and four years. 

The overall direction is clear: untied funding is being compressed, own-source revenue is constrained, and more council priorities are being pushed into competitive funding environments. 

Why are competitive grants harder to win? 

Competitive grant programs are increasingly oversubscribed. 

The Growing Regions Program received 650 applications in Round 1, seeking $2.7 billion against a total program envelope of $600 million across two rounds. That is more than four times oversubscribed before the first dollar was awarded. 

This does not mean funding is unavailable. It means the standard required to win it is higher. 

Funding will favour projects that present a clear strategic case, a defensible economic logic and a business case that an assessing department can confidently defend to decision-makers, ministers and auditors. 

A strong funding application does not simply describe a project. It explains why the project matters, why it is needed in this location, why it is the right intervention, what benefits it will deliver, and why the project is ready to proceed. 

What does investment readiness mean for councils? 

For councils, investment readiness means having a project supported by the strategic, economic and delivery evidence needed to make it credible to funders, decision-makers and the community. 

An investment-ready project usually has: 

• a clear problem definition 

• alignment with council, regional and government priorities 

• a tested investment logic 

• quantified economic or community benefits 

• a realistic cost and delivery pathway 

• a defensible business case or funding proposition 

Most councils have project lists. Fewer have investment-ready pipelines. 

A project list describes what a council would like to do. An investment-ready pipeline identifies which projects are strategically important, economically defensible, deliverable and ready to be matched to future funding opportunities. 

Why does the six-week scramble rarely work? 

The natural response to a tight funding environment is to wait. 

Wait for the guidelines. Wait for the announcement. Wait for the funding window. Then mobilise quickly. 

This is often the lowest-return approach. 

Six weeks may be enough time to write an application. It is rarely enough time to do the thinking the application needs to be built on. By the time guidelines are released, councils with strong submissions are often drawing on work completed months earlier. 

They already know which projects matter most. They have tested the investment logic. They understand the economic benefits. They have identified the evidence gaps. They have a business case, or the core components of one, ready to adapt to the funding criteria. 

The councils that perform well in competitive rounds are not always the councils with the largest or most ambitious projects. They are the councils that can clearly demonstrate why this project, in this place, at this time, with this evidence base, is the right investment. 

What work should happen before the next grant round opens? 

The work that improves funding readiness is structured and practical. It is not simply grant writing. It is the strategic and economic groundwork that allows a future funding submission to be written quickly and defended confidently. 

It usually includes: 

• Strategic Direction and Investment Identification 

Testing council priorities against community outcomes, economic opportunity, regional need, delivery capacity and likely funding pathways. 

• Investment Logic Mapping 

Defining the problem, the benefits sought, the changes required and the most appropriate intervention. Done well, this reduces scope creep and strengthens future business cases. 

• Economic Impact Assessment 

Estimating the jobs, gross regional product, household income and industry output expected from a project, both during construction and through ongoing operations. 

• Cost-Benefit Analysis 

Testing whether the benefits of a project justify the costs, using a methodology aligned with relevant government guidance where required. 

• Business Case Development 

Bringing the strategic need, investment logic, economic evidence, costs, benefits, risks and delivery pathway into a single defensible proposition. 

Each step strengthens the next. Investment logic makes economic assessment more focused. Economic evidence makes the business case stronger. A business case built on clear strategy and robust evidence is easier to adapt when funding guidelines are released. 

The window is before the round opens –

The absence of an open funding round is not a pause. It is a strategic window. 

This is when councils have time to test priorities, refine project logic, model economic benefits, assess costs and benefits, and prepare business case material without the pressure of a submission deadline. 

For council CEOs, General Managers and executive teams, the key question is not only: 

“How do we win the next funding round?” 

It is: 

“What investment-ready projects do we want ready to go when the next funding opportunity opens?” 

That question can be answered. But the work needs to begin before the deadline arrives. 

How does REMPLAN Advisory work with councils?

REMPLAN Advisory works with councils to strengthen the evidence base behind major projects, funding applications and investment decisions. 

Our team supports local government executive teams with strategic investment planning, Investment Logic Mapping, economic impact assessment, cost-benefit analysis and business case development. 

This work is underpinned by REMPLAN’s economic modelling platform and our experience working with councils across Australia. 

We help councils move from project ideas and priority lists to clear, evidence-backed investment propositions that are ready to be tested, refined and matched to future funding opportunities. 

Talk to REMPLAN Advisory about your council’s investment-ready project pipeline – email us.  

 

Frequently asked questions: 

What is an investment-ready council project? 

An investment-ready project is supported by the evidence needed to make it credible to funders and decision-makers. This usually includes a clear problem definition, strategic alignment, investment logic, economic evidence, cost-benefit assessment and a business case or funding-ready proposition. 

Why should councils prepare before the grant guidelines are released? 

Once grant guidelines are released, councils often have limited time to respond. Preparing earlier allows councils to test project logic, strengthen the evidence base and develop business case material before the submission deadline. 

What is the difference between a project list and an investment pipeline? 

A project list captures ideas or priorities. An investment pipeline prioritises projects based on strategic need, economic value, deliverability, evidence strength and likely funding pathways. 

 

Sources:

ALGA Financial Assistance Grants briefing 2025; LGNSW Cost Shifting Report 2025, Morrison Low; IPART Rate Pegs for NSW Councils 2025-26 and 2026-27; Victorian Essential Services Commission Local Council Outcomes Report 2025; Queensland 2024-28 Local Government Grants and Subsidies Program guidelines; Department of Infrastructure Growing Regions Program and Thriving Suburbs Program documentation; Federal Budget 2026-27.