Prime Minister Tony Abbott is involved in an increasingly high-stakes fight over the government's borrowing limit, with his attempt to lift the debt ceiling rejected in the Senate.

Mr Abbott wanted to increase Australia's debt limit by $200 billion to $500 billion, but Labor and the Greens have blocked the attempt in the upper house, voting for an amendment that would take the ceiling to $400 billion.

The Coalition will not accept the amendment, bringing about a stand-off over the government's debt ceiling.