Department officials have been asked to to explain how a $1 billion cut to increases in council payments will affect regional Australia, and some are less-than-happy with the answer.

The big cut could mean yet more rates rises for some regional governments.

Labor Senator Stephen Conroy fired questions at officials with the Department of Infrastructure and Regional Development on Tuesday, accusing it of not carry-out a complete analysis.

The resulting cuts strip around $1 billion from planned rises in financial assistance grants. Councils rely on these payments to keep local roads and infrastructure in shape.

Local government are looking to quantify the full cost of change, which takes effect from July 1.

The Australian Local Government Association says it is concerned that struggling rural and regional councils will have no choice but to lift rates.

Department of Infrastructure and Regional Development secretary Mike Mrdak said there had been “some analysis”, but the full impact on residents was “not easily able to be determined”.

One thing Mr Mrdak knew for sure was that state government-run grants commissions have an "equalisation process", which could spread the effects.

Conroy asked if the savings could go to the government's $1 billion Stronger Regions Fund, a central election promise by some Nationals members.

Mr Mrdak said there would not be 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 Conroy says budget papers show the savings from the cuts to council payments will go to helping 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 pointed out that as a departmental public servant, it is not for him to determine or answer for government priorities.