Australian taxpayers are paying more than $6 billion a year to top up Western Australia's overflowing coffers because of a "perverse" Morrison-era deal, a scathing report has found.
The Productivity Commission recommended scrapping the "costly" 2018 GST deal, which the federal budget projects will send $60 billion across the Nullarbor by the end of the decade.
The independent advisory body's interim report found the reforms achieved almost none of their objectives and had made the GST transfer system, which states depended on for almost a quarter of their revenue, less equitable and more complex.
But the WA government - the prime beneficiary of the deal - dismissed the report as the work of "east coast clowns" and denigrated other premiers as "east coast whingers".
"The changes would punish WA for its success simply to prop up other lazy states," Premier Roger Cook told reporters on Friday.
"On the Productivity Commission, you do not have a single representative from Western Australia, and it's clear from their report that they don't get Western Australia."
Mr Cook rejected the commission's findings that the system undermined the core purpose of the GST distribution model: to ensure all states had the fiscal capacity to offer Australians a similar standard of services and infrastructure.
The 124-page report found it created perverse outcomes. Because WA's GST share per capita was tied to NSW's, a bushfire that hit the NSW economy would result in WA receiving a funding windfall.
The commission recommended returning to the pre-2018 system, but with targeted changes to address issues arising when mining-dominant states increased mineral royalty rates.
"The 2018 changes have largely not achieved their goals and have cost more than four times as much as projected," Productivity Commission deputy chair Alex Robson said.
Every state and territory government bar WA has called for the deal to be ripped up or strongly amended.
Queensland Treasurer David Janetzki threw down the gauntlet to the federal treasurer to change the "unfair" system.
"Jim Chalmers now has a clear choice. He can continue to defend a broken system or finally stick up for his home state and the national interest," he said.
His NSW counterpart Daniel Mookhey called the report "historic".
"An Australian living in Cabramatta in Sydney, Carlton in Victoria, Coober Pedy in South Australia or Cairns in Queensland is worthy of the same supports from their governments as an Australian living in Cottesloe in Western Australia," he said.
Before the meeting, Prime Minister Anthony Albanese reassured West Australians they would receive their fair share of GST and played down the report, which was mandated by legislation passed under then-prime minister Scott Morrison.
But he did not rule out changing the GST system, saying the government would wait for the Productivity Commission's final report - due to be completed by the end of 2026 - before making up its mind.
His government has maintained the deal since coming to power in 2022, conscious of WA's political exigency, with federal Labor holding 11 of the state's 16 seats.
Mr Cook said the prime minister had reassured him in a phone call on Friday morning that the current arrangements would remain in place.
He said if the report's recommendations were implemented, WA would lose between $1 billion and $6 billion each year, putting his $2.4 billion budget surplus at risk.
As well as incurring the wrath of Mr Albanese's Labor allies in the west, changing the deal would risk a political stoush with the ascendant Pauline Hanson, who has vowed to protect WA's GST share.
While the GST arrangements dominated a meeting of federal, state and territory treasurers on Friday, they also agreed on a $460 million deal to boost productivity in the trucking industry and to allow nurses to prescribe and administer medicines.
Together, the measures could boost GDP by up to $5.6 billion annually, Dr Chalmers said.
