WARREN Truss is playing hardball on a funding freeze that is costing our region millions of dollars.

The Southern Downs Regional Council is feeling the pinch as the Federal Government's three-year pause on financial assistance grants indexation enters its second year.

The Deputy Prime Minister's office told APN Newsdesk there would be no backdown on the 2014/15 budget decision that is costing the council at least $2.748 million.

Southern Downs Regional Council Mayor Cr Peter Blundell said the impost would hit roads and other projects.

"The council will either need to reduce projects in areas such as roads, water infrastructure provision or other activities eligible under the grants by this amount, or increase revenue raised from the community by way of rates and levies to cover essential projects," Cr Blundell said.

A spokesman for Deputy Prime Minister Warren Truss said the decision would not be reversed.

"The temporary indexation pause of the grants program is necessary to repair Labor's debt and deficit disaster," the spokesman said.

"All Australians are being asked to play a part in repairing our nation's financial woes, including local government."

The spokesman said the government was providing $9.45 billion under the program to councils.

"This temporary indexation pause is more than offset by increases in other Federal Government funding to councils."

ALGA president Troy Pickard said councils across the country had to make tough decisions about rates and infrastructure investment because of the decision.

"In the face of the freeze, councils are re-evaluating what services and infrastructure they can continue to provide to adjust to the reduced revenue levels," Cr Pickard said.

"It is ultimately our communities that will feel the pain of this freeze, so on their behalf ... the ALGA is renewing its call to the government to restore indexation of the grants as soon as possible.