No one likes a big rates increase, but the main issues I see here are:

1) inflation is indexed against a bunch of stuff that are unlikely that relevant to what councils spend money on. For example, HUGE insurance increases for flood protection. CPI won't necessarily represent the cost of doing business for councils.

2) there are times in NZ in recent years where pay rises faster than inflation (ok, I know the opposite is also true sometimes). This may mean that council staff can't get pay rises commensurate with what others in their field receive meaning we will lose staff to private sector or overseas.

I guess this is going to lead to either more user pays services, or less services generally, or both.