Finance Minister Mathias Cormann has played down suggestions the federal government may review funding cuts to schools and hospitals.
The federal government's first budget a year ago ripped out $80 billion of unfunded Labor commitments to the states and territories for health and education.
On Friday, Prime Minister Tony Abbott headed off a showdown with the state and territory leaders by agreeing to discuss the issue at a mid-winter retreat.
Senator Cormann said the previous Labor government's "pie in the sky" spending promises put the country on an unsustainable spending growth trajectory.
"There's no magic pudding," he told Sky News on Saturday.
If the federal government spent more on education and health it means there would be less spent on welfare, Senator Cormann said.
Labor's Ed Husic rejected Senator Cormann's "revisionism".
He accused the coalition government of trying to starve states and territories of funds in order to force them to argue for GST reform.
"What they want to do was to strongarm the states and territories," he told Sky News.
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