Opposition Leader Tony Abbott has poured cold water on Liberal premier Barry O'Farrell's call to increase the GST rate or revamp the tax to revive his state's revenue flow.
The NSW premier said on Sunday it was time to re-examine the GST and whether its rate should be increased or some state taxes traded off in exchange for an increased share of the tax receipts.
Prime Minister Julia Gillard said federal Labor would not raise the GST and was quick to put pressure on Mr Abbott over the issue.
"I understand that Premier O'Farrell has called for this today, so it should be maybe something you raise with Tony Abbott, but federal Labor will not be raising the GST," Ms Gillard said.
Later in the day Mr Abbott was keen to squash the possibility of a change to the tax.
"The coalition has no plans to change the GST, none whatsoever," he told reporters in Sydney.
Mr O'Farrell said current national economic circumstances had never been worse and he couldn't see when they would pick up.
He blamed federal Treasurer Wayne Swan for being unable to articulate an economic plan to fill the community with confidence.
"It's a lack of confidence at a national economic level that's caused the reduction in GST receipts, that's caused the flow-on consequences for the states," Mr O'Farrell told Sky News on Sunday.
If there was no prospect of things picking up everything should be on the table, Mr O'Farrell said.
Mr O'Farrell said he had not discussed the move with his Liberal counterparts or other premiers.
He would not rule out raising royalties to increase state revenues, but said the mining sector was facing lower commodity prices which had already resulted in job losses.
"There's only so much juice you can squeeze from a lemon that's already under pressure," he said.
Mr Swan said governments at all levels had to adjust to lower tax receipts in recent years and the federal government had to find responsible and measured savings.
"This is always a tough process and it gets tougher with each budget," he said in his economic note on Sunday.
"But we will keep going about this task in a way that does everything possible to protect jobs, and the interests of low- and middle-income households and our community's most vulnerable."