A Federal Government backbencher has suggested halving Sunday penalty rates, citing the "draconian effect" they have on local communities.

Before the election the Coalition promised it would not set penalty rates and that no worker would be worse off under its industrial relations policies.

Labor cast doubt on the pledges and Coalition MPs have been reticent to talk about the issue.

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However, Victorian Liberal backbencher Dan Tehan says he wants a debate about the relevance of penalty rates and thinks changes could be made without breaking election commitments.

"[We need to] have an adult debate about this because, at the moment, they're having a draconian effect on our local communities," he said.

Mr Tehan says a bakery in his electorate has stopped opening on Sundays, due in large part to penalty rates.

"They're starting to hurt workers, businesses and local communities," he said.

"I'm not saying that means there needs to be wholesale change, but people are getting more concerned when you drive through towns on Sundays and there aren't businesses open because they can't afford to employ people."

Mr Tehan says the Fair Work Commission should consider the relevance of the current rates, which is in line with a recent government submission to a review of the rates.

"Students want to study during the week and they want to work on weekends, so therefore should businesses be paying a 200 per cent premium having to employ them?

"Maybe if they were just paying a 100 per cent premium that might work."

A spokesman for Federal Employment Minister Eric Abetz says the Fair Work Commission sets the appropriate level of penalty rates and anyone interested should make a submission to the review.

The view on penalty rates inside the Coalition is not unanimous.

MP for the seat of Bowman in Queensland Andrew Laming says the Government's focus should instead be on encouraging employers to hire local workers first.

"Penalty rates are a significant amount of obviously the costs of running a small business, but we are proud in this nation that we can give people a start on decent wages," he said.

"There's a long history of paying penalty rates and I don't see any need to change it."

He believes the Government could have a massive impact on youth unemployment without touching penalty rates.

Lower rates crucial to combating youth unemployment: MPs

But other Liberal MPs believe the matter should be examined and debated in the party room.

"I think we've got to have a conversation and businesses and small businesses and medium businesses around the country have got to be very direct with government about how they could add more young people on, how they could give them more hours if penalty rates were adjusted," Alex Hawke, who represents the Western Sydney seat of Mitchell, said.

"I mean, the Sunday rate comes from an era when Sunday trading was unusual. Today it's the busiest time of the week and it does affect many small enterprises.

"I think the Coalition backbench is hearing from small businesses around the country about this issue, that, if we want to do something practical to help the economy get better, to start addressing things like underemployment and youth unemployment, penalty rates have to be looked at."

His Western Sydney colleague, the Liberal MP for Reid, Craig Laundy, agrees.

He had to pay penalty rates at his family's bistro a couple of years ago.

Mr Laundy supports suggestions that would see penalties retained for nurses and firemen but reviewed for the hospitality industry.

"I think you should approach it industry by industry, and I'm not averse to that at all, and I'm not going to advocate on behalf of the industry I came from; they can fight their own battles.

"All I am doing is saying I think the we should have a sensible debate.

"Talk to parents in my electorate whose children can't find casual work. Look at youth unemployment. Youth unemployment in the west of my electorate is running at 20 per cent.

"The traditional carriage of a student from school to university, their first employment is in casual work and the reality is that, over the last six years, casual work has and continues to dry up and we need to look at ways that we can turn the tap back on."