Numerous state-based and national public inquiries across Australia have demonstrated conclusively that local councils face almost insurmountable problems in coping with the problem of financing a massive backlog in local infrastructure maintenance and renewal. Various solutions have been advanced to tackle the problem, including the establishment of a federal government local infrastructure fund. In this paper we develop an alternative funding approach based on the issue of asset-backed securities by local councils in the capital markets. Using the case of water and wastewater operations by local councils in New South Wales, we show that local government has access to a relatively attractive asset in the form of municipal income that can form an income stream payable on a fixed-income security issued by the Australian local government sector.

Financial viability remains a matter of acute concern for Australian local government. Efforts to improve local government sustainability in Australian local government have focussed principally on structural change - primarily through forced amalgamation – which is directed at generating savings by exploiting economies of scale. However, empirical evidence on the existence of substantial scale economies across the range of municipal functions is mixed and inconclusive. In general, in debates over structural reform in Australian local government, claims by proponents of amalgamation that significant economies of scale will inevitably emerge as a consequence of larger merged councils are typically not accompanied by econometric modelling or indeed any other empirical evidence. This thesis argues that much of the existing empirical literature relating to the optimal size of local government is plagued by methodological flaws. Accordingly, it cannot be used to justify compulsory consolidation programs based on increasing the population size of local government entities. This conclusion is reached after examining the implications of these flaws on the question of optimal size in Australian local government. Recent innovations in the empirical analysis of municipal size and performance are considered. Using these developments, it is argued that future structural reform programs must be assessed by employing a range of techniques that take account of regulatory priorities, citizen preferences and projected outcomes.

Quantitative research of local government financial management reform in a developing country, focussed on the measurement of international technical assistance contributions, promised to be a useful practical addition to the literature and of practical assistance to reform assessment. There is an abundance of public sector financial management reform literature, but it is most often qualitative and does not provide an analysis of the real financial impact of technical assistance, especially in the international public sector financial management reform field. Gaining an understanding of the real financial condition and performance improvements of target organisations, as a fundamental success measure of success, is more important than qualitative assessments simply of process improvement. South African local government financial management reform provided a unique research opportunity. Extensive technical assistance over many years to its municipalities, including some with international expert advisors for long periods, provided a research sample of municipalities with and without experts for comparison. A World Bank-sponsored local government financial management technical assistance program (known as MFMTAP), commencing in early 2003 and concluding in May 2008, provided a research opportunity that was witness to financial management outcomes prior to, during and post the program. Research techniques developed during the research and outcomes would be useful for evaluating the MFMTAP post completion, and might support monitoring and evaluation of similar programs in other developing countries.