Finance Minister Mathias Cormann is optimistic that a deal can be reached over how GST revenue is carved up to help Western Australia through a damaging slump in the iron ore price.
But the WA senator says the state government has to show it is willing to undertake reforms to boost its economy.
State and territory treasurers rejected an idea to freeze the GST distribution at 2014/15 levels to prevent WA's share slump to less than 30 cents for every dollar spent in 2015/16.
But Senator Cormann would like to think that on reflection the country's leaders will strike a deal when the Council of Australian Governments meets this week.
"We haven't reached the end of the process yet," Senator Cormann told Sky News on Sunday.
He said by freezing GST relativities, each state would still be better off with an increase of five to six per cent in revenue compared to this financial year.
But he said WA has to show a willingness to reform, such as undertaking privatisation, and he rejected WA Premier Colin Barnett's view that these issues aren't linked.
"There is no doubt in my mind that the West Australian government has to do better in the pursuit of economic reform," he said.
"The fact that they don't seem to have more of a sense of urgency around that, in my mind, weakens their argument in relation to GST distribution."
Labor front bencher Mark Butler said there was an important principle of the Commonwealth that the nation's wealth, as far as possible, be distributed equally.
"While some of the mining states may suffer a bit of a boom and bust in terms of their revenue, the idea of sticking to that principle at the heart of the nature of the Commonwealth is a very important one," he told Sky News.
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