Nigel Scullion is “unsuitable” to resolve a dispute over funding for housing in remote Indigenous communities, according to Western Australian Aboriginal affairs minister Ben Wyatt.

WA has been at odds with the federal government since December over its decision not to renew the 10-year $5.4bn National Partnership Agreement on Remote Housing (NPARH), instead brokering individual shorter-term deals with states and territories. The agreement expired on Saturday.

The federal government has offered $60.9m to WA over the next three years to continue funding remote housing, but Wyatt, who is also treasurer, said that left WA with a $400m shortfall.

He likened the offer to the federal government’s 2014 decision to withdraw Municipal and Essential Services funding after offering a $90m parting deal, which prompted the former WA government to suggest up to 100 remote communities faced “closure”.

“I’m still hopeful that the commonwealth government will re-engage and not simply try to throw some money on the ground and walk away from what has been a 50-year responsibility,” Wyatt said.

He also referred to what he suggested was a racially charged jibe in a press release sent by Scullion’s office to WA media, which was headlined “Little Wyatt lies”.

“I’ve spent a lot of my life having to deal with the slings and arrows of being an Aboriginal person,” Wyatt said. “Nigel Scullion is just the latest in that ... he’s clearly unsuitable to try to resolve this issue and I am surprised and disappointed that he would resort to such rhetoric.”

His comments come after WA launched a campaign called “Don’t walk away”, which accused the federal government of backing down from a commitment to close the gap in Indigenous housing and leaving 165 remote communities in the lurch.

Scullion accused Wyatt of putting politics ahead of security for Aboriginal people living in remote communities, saying he had been negotiating in good faith with the WA housing minister, Peter Tinley, for a number of months.

The federal government signed a five-year $550m deal with the Northern Territory in April, which will be matched dollar for dollar by the Territory government. Agreements have also been negotiated with New South Wales, Victoria and Tasmania.

Letters from the WA government to Scullion’s office about the housing deal suggest WA should receive a similar level of funding to the NT, because building in the remote Kimberley and Pilbara regions was similarly complicated.

Scullion said the commonwealth’s offer would allow WA to meet its remote housing commitments, provided the state increased its contributions. WA currently spends about $90m a year on remote housing.

Guardian Australia understands Scullion also called Wyatt and apologised for any offence caused by the press release.

“It is disappointing that instead of responding to the commonwealth, Ben Wyatt has gone to the media to play politics with the futures of Aboriginal people in WA,” Scullion said.

“It is also disappointing that Ben Wyatt appears to be announcing that he is considering withdrawing government services from remote communities. The commonwealth does not support Ben Wyatt’s approach to link an agreement on future investment in housing to the future of remote communities.”

Wyatt did link remote housing funding to the withdrawal of municipal services funding but has not suggested that WA will pull remote community funding.

He told media at the remote community of Jigalong in the Pilbara, where he attended the funeral of Daisy Kadibil, the youngest of three sisters who inspired the film Rabbit Proof Fence, that listening to stories told at the service “highlights the importance of remote communities and that we do need to provide services”.