The Morrison-era GST deal, which Tasmanian economist Saul Eslake has dubbed the "worst public policy decision of the 21st century thus far", is set to be called a failure by the Productivity Commission in a highly-anticipated report due on Friday.
The WA government, the main beneficiary of the deal forecast in the Budget to cost federal taxpayers $60 billion by 2030, has mounted a campaign to maintain the distribution method, which is backed by Prime Minister Anthony Albanese.
"Western Australia deserves a fair deal and they contribute to our national economy. They're a driver of our national economy," Mr Albanese told reporters on Friday morning.
But NSW Premier Chris Minns believes WA is receiving too much.
"We're now in a situation where Western Australia is so wealthy and so rich that they're competing and bidding on NSW rugby league games," he said.
"You're seeing similar behaviour from Gulf states like Saudi Arabia and the UAE and Dubai."
The commission's interim report, which will be made public after the meeting of federal, state and territory treasurers on Friday, is the first milestone of a review mandated when the legislation was introduced under then-prime minister Scott Morrison in 2018.
Instead of distributing GST to the states based entirely on need - a principle called horizontal fiscal equalisation that has existed since federation - the new system ensures resource-rich WA receives no less GST per person than the fiscally stronger of NSW or Victoria.
To ensure that no other states are worse off, the federal budget will contribute top-up payments to the tune of $6.6 billion in 2026/27.
Mr Albanese did not rule out changing the GST system, saying the government will wait for the Productivity Commission's final report - due to be completed by the end of 2026 - before making up its mind.
Since he came to power in 2022, his government has maintained the deal, conscious of WA's political exigency, where federal Labor holds 11 out of a total 16 seats.
Any changes to the arrangement would incur the wrath of Mr Albanese's Labor allies in charge of the state.
WA Treasurer Rita Saffioti said the eastern states viewed WA as a "cash cow" and her government would settle for nothing less than its fair share of GST.
It would also risk a political stoush in the west with the electorally-ascendant Pauline Hanson, who has vowed to protect WA's GST share.
The One Nation leader urged other states to allow more mining to boost their tax revenue instead of relying on WA to prop them up.
Other states point out they haven't been gifted the same resource endowments as WA, which has a moratorium on uranium mining in place.
The deal will help deliver WA a $2.4 billion budget surplus in the 2026/27 financial year.
While the GST deal is likely to dominate the meeting, the agenda will also cover a $400 million federal injection to boost productivity in the trucking industry by eliminating paperwork and increasing road access for electric trucks.
The Albanese government will also offer to pay the states $60 million to remove barriers preventing nurses from prescribing and administering medicines.
Together, the measures could boost GDP by up to $5.6 billion annually, Treasurer Jim Chalmers says.
The federal government will also provide an update on its work to streamline the National Construction Code (NCC), which the building industry says is overly complex.
The Australian Chamber of Commerce and Industry also urged the treasurers to agree on measures to protect small businesses from restructuring costs as a result of the federal budget's tax hike on discretionary trusts.
