Federal Treasurer Scott Morrison has rejected warnings the Liberals would face an electoral wipeout in Western Australia if it didn't give the state more GST money.
He told the media in Perth he was focused on making the "right decision".
The WA government has announced its submission to a Productivity Commission review of the $66 billion carve-up includes sharing revenue on an equal per capita basis, which would net the state an extra $10.5 billion over three years.
WA governments have increasingly felt dudded by the complex formula that has seen its share fall as low as 30 cents - it is at 34 cents now - while the rest of the states get well above 100 cents.
"This is not a process of haggling, this is a process of working out what's the best thing to do for the entire country," Mr Morrison said.
Premier Mark McGowan had earlier said the party was in big trouble in WA, where it has traditionally been a powerhouse for the Liberals, if it did not reform the system but Mr Morrison said he was rightly focused on the economics.
"I am asking the Productivity Commission to answer the question, what is the cost to the national economy of this issue before us?" he said.
"When the whole economy grows, Western Australia benefits too."
The WA government has partly attributed the state's massive debt and deficit to the GST carve-up.
One aspect in WA's favour is that Mr Morrison on Thursday repeated his view that state and territory governments should have their share of GST revenue cut should they limit gas exploration.
"If states and territories aren't going to realise the opportunities they have, particularly with their resource base ... is it a fair enough thing that states like Western Australia which have taken those steps would be penalised," he said.
BHP Australian mining head Mike Henry similarly said this week if mining states such as WA could keep more of their royalties, it would encourage other states to develop their gas resources and boost their economies.
SOME OF WA'S OTHER GST REFORM OPTIONS:
* Establishing a GST relativity floor of 75 to 80 per cent;
* Using a global revenue base to assess states' revenue capacity, rather than separate assessments for minerals, land tax, stamp duty and gambling taxes, to boost incentives for states to grow their economies;
* Discounting revenue assessments by allowing states to keep some revenue generated locally and exclude it from the GST assessment, encouraging them to develop industries; and
* Better accounting for the costs of developing industries.
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