Premier Colin Barnett says his warnings that WA's declining GST share will eventually impact on services have become a reality, flagging hits to health and education in next month's Budget.
The Premier said he had raised the thorny GST issue with returned Prime Minister Kevin Rudd, who telephoned him this morning, and emphasised it remained "WA's biggest issue".
The share of collected GST returned to the State fell below 50c for the first time this week to 45 cents in the dollar.
Mr Barnett has long warned that the State could not continue to absorb such a rapidly diminishing share forever without frontline services suffering.
Today, he said WA had now reached that point.
"WA loses about $2 billion a year because of the very unfair deal we get from the Commonwealth over our share of GST," Mr Barnett said.
"For this year, as we start the new financial year, we will actually get $400 million less than we got last year. So the State Government has to make that up, that's our big problem in drafting this year's budget and it is starting to get down to service levels.
"It is starting to affect education and health because those two areas make up over half of State Government spending. So yeah, that time has come."
Mr Barnett declined ahead of the August 8 State Budget to reveal which specific areas in health and education would suffer.
"We're going through the Budget process right now. I'm just being open, that's where we're at," he said.