Google has threatened to block its search engine in Australia if the company is forced to pay media outlets for their news content.

A new digital news code in Australia which require tech giants like Google and Facebook to negotiate payments with local publishers and broadcasters with a government-appointed arbitrator to decide the payment should a mutually agreed charge was not reached.

Google and Facebook have threatened to shut Australia out of the platforms should the new law be enforced.

“Coupled with the unmanageable financial and operational risk if this version of the code were to become law, it would give us no real choice but to stop making Google Search available in Australia,” Mel Silva, the company’s managing director for Australia and New Zealand, told a Senate inquiry into the bill.

“And that would be a bad outcome not only for us, but also for the Australian people, media diversity, and the small businesses who use our products every day.”

Australian Prime Minister Scott Morrison immediately hit back, saying “we don’t respond to threats”.

Ms Silva said the company was willing to pay a wide and diverse group of news publishers for the value they added, but not under the rules currently proposed, which includes payments for links and snippets.

She suggested a series of tweaks to the bill, adding: “We feel there is a workable path forward.”

Simon Milner, a Facebook vice president, said the sheer volume of deals it would have to strike would be unworkable.