The rate peg determines the maximum amount NSW councils can collect in rates, as well as some annual user charges such as stormwater, waste, water and sewerage.

Last year’s rate peg was set at 1.8 per cent.

IPART chair Peter Boxall said ratepayers would benefit from the modest rate of public sector wages growth in recent years, as well as the continuing “low inflationary environment”.

“This has seen the cost of some items used by councils fall, including fuel, gas and telecommunication services,” he said.

However, the low rate peg has been slammed by Local Government NSW (LGNSW).

LGNSW president Keith Rhoades said the 1.5 per cent rate peg was part of a financial noose which continued to tighten around councils, preventing them from becoming financially sustainable.

The rate peg has continued to go down since it was set as 3.4 per cent in 2013, and Cr Rhoades said it prevented councils from addressing the infrastructure renewal backlog.

"The reality is that rates have not kept pace with the cost of services and infrastructure that local government is expected to deliver," he said.

With the rate peg so low, councils would be forced to seek special rate variations, Cr Rhoades said.

"The whole system is set up to make councils look inefficient and financially profligate, when the opposite is true," he said.

Councils wishing to apply for special rate variation need to notify IPART by December 9.