Treasurer Wayne Swan has warned the states the federal government will act to protect the broader economy when it considers a review of the distribution of GST revenues.
"While we understand that states and territories will naturally pursue their individual interests, the Gillard government will continue to act in the broader national interest to ensure a strong economy and high-quality services for all Australians," Swan said.
An independent GST distribution review panel is considering whether tax distribution can be improved in light of structural changes reshaping the Australian economy.
The review is being conducted by former state premiers John Brumby and Nick Greiner, and businessman Bruce Carter.
An interim report was released this week.
The panel found the implementation and communication of GST distribution needed to be “fixed” – even if nothing else in the system changed.
"There may be merit in the Commonwealth Grants Commission (CGC) taking a more active role in educating those outside the various state treasuries about the principles by which GST is distributed," the report states.
A final report is due later this year.