A recent report by the Productivity Commission found the federal government's 2018 GST deal was "perverse" and costing taxpayers more than $6 billion per year to fill up WA's coffers.
Prime Minister Anthony Albanese has pledged to keep the deal, despite the arrangement costing $60 billion by the end of the decade.
The deal ensures mining-rich WA, where Labor holds 11 of the state's 16 federal seats, receives a guaranteed minimum share of the GST pool regardless of its actual revenue needs.
But while it has been applauded in the west, leaders in other jurisdictions have cautioned the GST arrangement could cost Labor support federally.
South Australian Premier Peter Malinauskas said states beside WA were now viewing GST distribution as an issue.
"You can win every single seat in Western Australia, but if you don't win a majority of seats in the rest of the country, you still lose," he told the Dubbo Bush Summit event on Thursday.
"The rest of the country is starting to catch on to the fact that the current arrangement is not okay."
NSW Premier Chris Minns joked at the summit other states should join forces against WA in fighting for a fairer share of GST revenue.
"We should gang up," he said.
The state Labor leader said the prime minister had made the wrong decision to guarantee WA a larger share.
"It's too expensive for Australia, and that money comes from somewhere," he said.
"It's got to be on the national agenda because all of our other arrangements depend on what our split of the GST is."
While the Morrison-government deal ensured other jurisdictions would not be worse off at the expense of WA, that provision will end at the end of the decade.
The GST issue was on the agenda at national cabinet in Sydney on Wednesday, when Mr Albanese met with state and territory leaders including WA Labor Premier Roger Cook.
WA Treasurer Rita Saffioti said the tax deal was essential for economic growth.
"We need to incentivise growing the economic base. We need a formula that incentivises new economic development," she told the Bush Summit.
Ms Saffioti met with productivity commissioner Angela Jackson on Wednesday to discuss the deal.
After Mr Cook labelled the commission "east coast clowns" following the release of the report, Dr Jackson expressed concern, saying the verbal attacks were a step too far.
"Our view is that a line was crossed in terms of the nature of those comments from the Western Australian premier ... he also called the report deceitful," Dr Jackson told ABC Radio on Wednesday.
"To undermine and, I guess, attack our integrity ... is an additional bridge too far, and ... something more broadly we are seeing in public debate internationally."
But the WA treasurer said the subsequent meeting with the commission went well.
The commission is set to hand down its final report into the GST deal by the end of the year.
8°C