The split vote came after a spirited debate in which the car parking fee increases - which come as a trade-off for an hour of free parking - were labelled "astronomical".

Councillors Ben Blain and Angie Paspaliaris voted against passing the budget that would see rates rise 1.5 per cent or on average $32 a year.

Cr Debbie Arnott said budget time was always a contentious and emotive topic, particularly this year after the impacts of the COVID-19 pandemic.

And while she said all councillors would have liked to freeze rates, the vision for a sound financial and sustainable organisation meant they were faced with difficult decisions.

"A rate freeze in effect costs council $600,000 per year which has a compounding effect, so after five years that extra cost to council is $3 million," she said.

She also revealed the recent one-week lockdown had cost the council $250,000. "Council is not an endless money tree," she said.

Cr Richard Ziegeler said the budget had been a vexed issue among councillors as well as the community.

He said he had argued during briefings against the rate rise and suggested imposing a smaller increase. "I didn't want to see a freeze because I think that would be completely irresponsible in terms of the debt we are carrying," he said.

Cr Ziegeler said the debt and financial pressures on the council was the legacy of previous councils.

"Some of the greatest critics of a rate rise have been responsible for some of those debts that we're faced with and dealing with," he said.

Ratepayers struggling to pay their bills have been urged to take advantage of hardship provisions in the budget.

Cr Blain said he didn't see any point in blaming anyone else for the council's finances.

"We are the new council, we are the ones driving the bus," he said.

"It's what we signed up for. The blame game has to stop and we are responsible for our own decisions.

"This budget under a new council could have been a budget supporting the community but in my view it's a budget where council's supporting council."

Cr Angie Paspaliaris said there had been exorbitant rate rises under previous councils, prior to rate capping being introduced, and that money seemed to have gone missing, wasted or was spent elsewhere.

She said the impact of the pandemic had been "exceptional" and an organisation with an $80-$90 million budget had the capacity to find efficiencies over the next 12 months that could substitute for a rate rise.

"A rate increase in this particular year is not warranted," she said.

Cr Blain said the council needed to show Warrnambool residents it had its "house in order" and had to find efficiencies for the long-term viability of every service before asking the community for more money.

"Warrnambool ratepayers are paying their fair share and the community deserves relief," he said.

Mayor Vicki Jellie said her decision had been made for the very best interests and intentions for the city at heart.

Cr Max Taylor said he couldn't see the 42 per cent increase in car parking fees on the streets doing any good for the vitality of the CBD.

"I'm puzzled as to why the parking fees in the CBD are up astronomically," he said.