Joe Hockey has held out the prospect of a special GST rescue package only if the Barnett Government radically reshapes the State's finances and economy.
In an extraordinary game of brinkmanship, the Federal Treasurer signalled WA should sell its electricity poles and wires, deregulate its shopping hours and eliminate "anomalous" business practices, believed to include the Potato Marketing Corporation.
_The West Australian _understands that State Treasurer Mike Nahan has been working on a broad economic reform package for the State and will present it to Premier Colin Barnett when he returns from India.
But time is running out. To secure the emergency funding from the Commonwealth, which is set to inflame tensions with every other State and Territory, WA's blueprint of reform will have to be agreed on by the end of the month.
It comes after a meeting of State and Territory treasurers yesterday where it was confirmed that WA's GST share would fall to less than 30Â¢ in every dollar of the tax paid by the State's shoppers.
WA will get just $1.9 billion, or 3.4 per cent of the total, $57 billion raised across the country.
If GST was allocated purely on population share, WA would get $6.4 billion. Dr Nahan unsuccessfully sought the support of other treasurers for a change in the way the GST is allocated.
Treasurers from both the ALP and the coalition raised concerns about WA's spending through the mining boom years, its failure to undertake major economic reform over recent years and the damage a change to the way the GST is allocated would do to other parts of the Commonwealth.
Mr Hockey said the Federation was at risk if a State's share of GST could fall so low simply because of a change in the value of one mineral.
"I think the fairness test would suggest that going to 30Â¢ in the GST per citizen is at the extreme end," he said.
He has pledged to look at options to provide cash to WA which, because of the falling price of iron ore, is facing a Budget deficit well beyond $1 billion in the coming financial year.
But Mr Hockey, who said he could not simply hand over cash to WA, made it clear there would have to be change in the WA economy.
He urged "politically painful reform", as other States had done, including the contentious move by the re-elected NSW Government to sell its electricity poles and wires.
While not revealing what reforms WA would have to embrace, Dr Nahan said he and Mr Barnett would have to look at change.
Opposition Leader Mark Mc- Gowan said the Liberal Party had to take the full blame for the loss of more GST money. He said the State should direct government-owned entities, such as the State's power network, not to pass on GST to the Federal Government.
Mr McGowan said that under the Constitution, the State had every right to withhold the payments as a way of showing the Federal Government it was serious about changes to the entire GST system.
Victorian Treasurer Tim Pallas said his State and NSW had propped up WA finances by $20 billion over the years. "It appears that while the State of WA is no longer a mendicant State, they haven't shrugged the mentality of being a mendicant State," he said.