Liberal MP Sharman Stone has launched an extraordinary attack on Prime Minister Tony Abbott and Treasurer Joe Hockey, accusing them of "lying" in defending their decision not to give $25 million to fruit processor SPC Ardmona.

Mr Abbott, Mr Hockey and Employment Minister Eric Abetz have all suggested it was the fruit cannery's "overgenerous" workplace conditions with unions that had contributed to its financial woes.

Dr Stone, whose Goulburn Valley electorate takes in SPC Ardmona, told ABC radio on Tuesday that her colleagues were misleading the public by saying workplace conditions were to blame.

Asked whether she thought Mr Abbott and Mr Hockey are ''actually, really lying when they're saying it's about this issue (the workplace agreement)'', Dr Stone responded: ''Well they're not speaking the reality.''

Asked if that constituted ''lying'', Dr Stone said: "It's not the truth, that's right, it's lying.''

"What really upsets me most . . . the federal government didn't say, look we'd love to help but we just don't have the money right now," she added.

"What they said was, we're not going to help because it is the amazing wages and conditions that have knocked this company for six."

Dr Stone said such arguments were "just wrong".

"If I was in Parliament I couldn't say 'liar' because it's unparliamentary.''

Rather than overly generous wages and conditions, it was the "dumping" of cheap products by supermarket chains, the Coles and Woolworths duopoly, the rise in imports, the floods and 10 years of drought that contributed to SPC's troubles, Dr Stone said.

"This is a witch hunt," she added. "And sorry, I don't like witch hunts, which are . . . unfair and in this case could lead to us losing an industry."

The Prime Minister's office has been approached for comment on Dr Stone's comments. Mr Hockey's office declined to comment.

Queensland LNP member George Christensen said Dr Stone was ''very good participant in the Coalition'', but told the ABC that she can ''probably go a little bit too far sometimes''.

''That accusation to the Prime Minister is probably a step too far.''

In a decision taken last Thursday that could risk up to 3000 jobs in Victoria's Goulburn Valley, Mr Abbott supported Liberal economic dries including Mr Hockey and Finance Minister Mathias Cormann to knock back SPC's request for government co-investment.

Industry Minister Ian Macfarlane and Agriculture Minister Barnaby Joyce had backed the company's request, which would have triggered a $25 million investment from the Victorian government and ensured SPC's parent company, Coca-Cola Amatil, would spend up to $161 million on the canning facilities.

SPC managing director Peter Kelly said the decision was disappointing and would trigger a review of the company's manufacturing operations. Victoria's Deputy Premier Peter Ryan said the decision was a significant setback for the Goulburn Valley.

Labor seized on Dr Stone's use of the ''L-word'', with industry spokesman Kim Carr telling Fairfax Radio: ''There's no doubt about it, the government is telling lies about the workers in the Goulburn valley''.

Labor leader Bill Shorten said that the Murray MP was ''right''.

''We've got a Liberal MP here willing to tell the truth and call out Tony Abbott and Eric Abetz,'' he said.

''Tony Abbott and Eric Abetz should stop blaming the workers for their decision to sell out SPC Ardmona jobs.''

Mr Abbott said last week that the company had posted a half-year profit of $216 million to June 2013, signalled its willingness to invest $161 million in its manufacturing operations and there was "no way" the government wanted to see workers take a pay cut.

"It is very important that they complete the renegotiation they have embarked upon," he said.

"It is very important they complete the negotiation of the enterprise bargaining agreement . . . there are wet allowances, there are loadings, there are extensive provisions to cash out sick leave, there are extremely generous redundancy provisions."

With James Massola, Judith Ireland

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