PUBLIC servants have been unable to explain how a $1 billion cut to increases in council payments will affect regional Australia, where the cut could mean yet more rates rises.

Under heated questions from Labor Senator Stephen Conroy on Tuesday, officials with the Department of Infrastructure and Regional Development said a complete analysis has not been done.

The cut will strip nearly $1 billion from increases to financial assistance grants to councils over the next four years - payments local government relies on local roads and infrastructure.

Councils are already trying to quantify the cost of the changes, taking effect from July this year, with the Australian Local Government Association already concerned it could contribute to rates rises, especially in struggling rural and regional councils.

But department secretary Mike Mrdak said while the department had done "some analysis", the actual impact on ratepayers was "not easily able to be determined".

He said he could not say what impact it would have, but that state government-run grants commissions had an "equalisation process", which might help to spread the effects of the cuts.

Sen Conroy asked if money from the savings were going to the government's $1 billion Stronger Regions Fund, a key Nationals election promise.

But Mr Mrdak said he wouldn't say it was a "direct relationship".

"This is an area where the government has had to take some measures to address the budget imbalance it faces and I think the treasurer has made that clear," he said.

But Sen Conroy pushed the point, saying the budget papers listed the savings from the cuts to council payments as helping with the government's "priorities".

"It seems fairly obvious the government's priorities don't involve local government and regional areas - the budget papers say that," he said.

Mr Mrdak said it was not for him to determine the government priorities, but that he did not believe local government was not a government priority.