Senior federal Liberals are lining up to deny claims they duped their coalition colleagues The Nationals into supporting an increase in the fuel tax.
But Labor has seized on the story as evidence the junior government partner are Liberal "patsies".
Cabinet ministers from Treasurer Joe Hockey down spent Thursday morning trying to hose down an ABC report in which Liberals were quoted saying the Nationals had been "played" over the budget measure.
The report says the Liberals fanned speculation about cutting the diesel fuel rebate - a proposal strongly opposed by farmers and the mining industry - as a way of getting Nationals support for the "less worse" measure of re-indexing the fuel excise.
"Emphatically, I say it is wrong," Mr Hockey told ABC radio.
"The story is wrong. I was there. I'm in it. I'm in the middle of it."
Finance Minister Mathias Cormann said the story was a "complete fabrication".
Deputy Nationals leader Barnaby Joyce said he trusted his Liberal colleagues, after discussing the claims with senior ministers such as Senator Cormann and Mr Hockey.
"The whole thing is a load of rubbish," he told reporters in Canberra.
But Labor said the National Party had been lied to over the budget, "just like the Australian people were".
"Everyone knows, the secret's out, the National Party are the patsies of the Liberal Party in Australia," Labor leader Bill Shorten told reporters in Canberra.
"If the National Party have any integrity they'll stand up against this unfair petrol tax."
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