Councillors expressed their concerns over the indexation freeze at council's meeting in St Arnaud on Monday night. The freeze has the potential to cut $576,000 from council's grants funding over the next three years.

As a result, several options were presented to council for consideration. One option was to gradually increase rates over the next three years, but councillors opted against this course of action.

Instead, council will write to the federal and state governments outlining the serious and deleterious impacts on rural councils generally and this council and community in particular, of the federal government's freeze on the indexation of the Financial Assistance Grants and the ALP's recently released policy on rate cuts.

Council also voted in favour of joining the Australian Local Government Association call to have the government restore the indexation of the local government Financial Assistance Grants which has been frozen for three years until 2017-18.

Cr Tony Driscoll said it was time councils sent a clear message to both the state and federal governments, that enough is enough.

"Twelve months ago, local government was looking at getting federal recognition in the constitution through a referendum," Cr Driscoll said.

"Now we are talking about the federal government slashing two percent funding to local government, which will tear a massive hole in our budgets now and in the future.

"We are really struggling as it is to provide extra services like Home and Community Care, aged care and children's services, at great cost to our ratepayers.

"There is the expectation that we will provide these services with very little help unfortunately from the federal government.

"It's no use the government saying tidy up your act. We have already cut services right to the bone in our last budget.

"We were very frugal and made cuts where we felt they could be made. At times, we were very ruthless.

"The only thing left now would be to cut services even further.

"We need to get the message across that local government has had enough."

Cr Driscoll said council's focus was always on providing the best services possible to its communities and ratepayers.

"We provide services that we see as most efficient to our ratepayers, yet we are always left holding the baby," he said.

"I noted with interest that the Australian Local Government Association has been fighting to have the value of the Financial Assistance Grants restored to a level equivalent to one percent of the tax revenue, the level they were when John Howard came to power in 1996. In recent years they slipped to 0.7% but I am shocked to see that they will decline to just 0.53% by 2017-18.

"To survive, we need state and federal support and we need our ratepayers to be active, stand up and have a voice.

"They need to make some noise, because the way things are at the moment, we can't survive.

"In relation to rate capping, this was tried in the Kennett years and it is a recipe for disaster.

"You only have to look at the example of our New South Wales counterparts. They have capped rates and there have been no improvement works, no asset maintenance and limited work on roads. It has been an absolute disaster."