New South Wales councils have renewed their calls for the removal of rate pegging following the release of the new rate cap limit.

The Independent Pricing and Regulatory Tribunal has set the rate cap limit for the next financial year at 2.8 per cent.

The Local Government and Shires Associations (LGSA) welcomed the new method of determining the rate cap limit, but warned that 2.8 per cent was inadequate for tackling local government infrastructure backlogs.

Local Government Association president, Keith Rhoades, said the new system provided “much more transparency and accountability”.

“For many years, the Associations have been calling for the rate cap figure to be based on a local government index and determined by an independent body, such as IPART, so we’re happy to finally see it today,” Cr Rhoades said in a statement.

“Despite this, the 2.8 per cent rate cap still falls well short of the real cost increases facing councils, making it difficult for councils to meet the growing service and infrastructure needs of local communities.”

NSW is the only state that is “constrained” by rate pegging, Cr Rhoades added.

Shires Association president Bruce Miller said councils would be unable to cover escalating costs and its $6 billion infrastructure renal backlog.

“The figure is in line with the current CPI, but councils already have to deal with an inadequate share of taxation and a bill that totals $440 million every year, for costs shifted onto us by other levels of government,” Cr Miller said.