New South Wales Premier Gladys Berejiklian has called for a radical rethink of federal-state relations and the Council of Australian Governments (COAG) process during a National Press Club address in Sydney today.

Ms Berejiklian wants fewer items on the COAG agenda and is pushing for states that pursue reforms to be given more freedom on how they deliver their responsibilities.

The Premier said the Commonwealth was the greatest idea of modern Australia, "but is a concept which in practice needs a massive overhaul".

She argued NSW had different challenges to other states and it was increasingly hard to reach consensus positions through COAG that suited everyone in the federation.

"The truth is modern federal-state relations are clunky and now thrive on mediocrity," Ms Berejiklian said.

The Premier said she had been frustrated in ministerial council meetings when the ACT — with a population of 400,000 — had been given an equal voice to a state of 7.7 million.

"The people of NSW should not continue to be held hostage to a lowest common denominator approach that privileges the parochial interests of small populations," Ms Berejiklian said.

She argued that the cooperative federalism started by former prime minister Bob Hawke and former NSW premier Nick Greiner 25 years ago had run its course and there were many matters which no longer required a national consensus.

"Too often COAG is a brake on reform, and in some cases a blockage," she said.

'We need an honest conversation about our federation'

Ms Berejiklian said COAG's agenda should be limited to issues that were truly national in their focus and would have a real chance of delivering important reforms quickly.

She wants some of the 45 separate national partnerships and project agreements with the Federal Government torn up or put aside as they are "too complex and in the end there is little ability to enforce the terms of the deals we have agreed".

Instead, she argued for a new approach which rewarded governments which pursued reform.

"Perhaps a better approach is a system of earned autonomy," Ms Berejiklian said.

"For the states that take the lead on reform — asset recycling, deregulation, service innovation — the Federal Government could step back, and allow greater flexibility in how we deliver our responsibilities.

"Today I am saying that we need to have an honest conversation about what works in our federation and what doesn't — and that we need a more flexible approach to deal with increasingly diverse circumstances.

"Let's try it with one state by looking to more bilateral agreements between the Commonwealth and a state — and if it can work, then others can choose to embrace it."

Ms Berejiklian said she would put a more detailed proposal to the Commonwealth in the coming months.