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Funding of local government systems in Australia has been falling relative to other tiers of government for the past 30 years with various adverse consequences, especially the decline of local government infrastructure. This paper seeks to explain this phenomenon by drawing on two relatively new theoretical strands in the political economy literature; the Australian theory of local government failure and the Wittman model of democratic efficiency. Three explanations are assessed: a traditional public finance perspective, Australian local government failure, and the institutional efficiency of democratic preference revelation. A secondary aim of the paper is to evaluate the implications of the Wittman model for the local government failure paradigm. [ABSTRACT FROM AUTHOR]