Prime Minister Malcolm Turnbull has warned states and territories that meaningful reform on health and education funding will require their full and genuine involvement on both structural and funding issues.
Speaking to business leaders, he said all Australia's governments needed to work together to get their own houses in order.
He said sale of commodities would no longer do it for Australia over the next decade.
Mr Turnbull and state premiers and territory chief ministers sit down at the Council of Australian Governments meeting on December 11 with a new dialogue on economic reform "the critical and leading item on that agenda".
All economic reform options remain on the table and imaginative reform was needed at federal and state levels, he said.
"Meaningful reform to address health and education funding will require a full and genuine buy-in from the states on both the structural and revenue-raising issues," he told the Australian Chamber Business Leaders annual dinner.
Mr Turnbull said the budget had been in deficit since 2008, so some might say "let's just go ahead and reduce the deficit by raising taxes".
But tax reform wasn't an end in itself and the tax system needed to be a catalyst of higher economic growth and should be the servant of the economy and its people and their businesses, not the other way round.
He said the government was examining personal tax particularly carefully.
"As the average wage earner moves into the second highest tax bracket there is a very real risk that current tax settings will unduly discourage participation, effort and innovation," he said.
Mr Turnbull said tax reform was a complex exercise and the government had insisted all options, even the unlikely, should remain on the table.
But ruling options in or out, as Labor had done, soon left no options at all before there was a proper review.
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