In December last year, the Independent Pricing and Regulatory Tribunal announced that council could raise its rates by 0.7 per cent, but Parkes - and many other local government areas - argued that the rise was insufficient.

The 0.7 per cent increase was the lowest granted in two decades.

In April council applied for an exemption to increase rates beyond 0.7 per cent and this week IPART approved that additional special variation, allowing Parkes Shire Council to bring rates up by 2.5 per cent.

"0.7 is just too low - it meant in real money terms, we're going backwards," council's general manager Kent Boyd said in April.

"Coupled with continued cost shifting from other levels of government and the ongoing COVID-19 pandemic and natural disasters, this historically low rate peg represented a significant challenge for local councils, who would need to review and reduce the delivery of services to their communities as a result of reduced revenue to fund those services."

Tribunal member Deborah Cope said the latest rate peg was determined in the low inflation environment at the beginning of the COVID-19 pandemic.

"Since then, high inflation and global uncertainty increased councils' costs," she said.

"Some councils have demonstrated that without additional funds they will not be able to deliver the projects they have already consulted on and included in their budgets."

The modest increases for councils are between 1.6 per cent and 2.5 per cent including the rate peg.

Each year IPART calculates a rate peg which sets how much councils can increase the revenue they collect from rates.

"We were careful to balance the need of councils to maintain the services and investment they had already committed to against the need to keep rates affordable for the community," Ms Cope said.

Applications were assessed against guidelines provided by the Office of Local Government.

The guidelines require councils to show they had budgeted for higher income than that provided by the rate peg and that they need the additional money to deliver on the projects they have already planned and included in their budgets.

IPART is reviewing the rate peg methodology to deal with volatility in economic conditions. The review will also look at the timing of the calculations in a fast-changing economic climate.

"Our review will be looking at how to deal with this challenge in the future," Ms Cope said.

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