"Today I've been able to get a very good indication of the willingness and appetite of the states and territories to engage in that process and it is now for us to … chart out an institutional framework for how they can be driven, in the same way as back under the Hilmer process.

"This is an exciting area but very early days, there are key principles to work off and flesh them out to ensure at the next meeting we can consider how that process can be managed."

The Treasurers also discussed tax reform but little progress was made in terms of an agreement. Sources said Mr Morrison presented a slide show of Treasury modelling of the various tax options that were put forward by the Premiers and then-prime minister Tony Abbott at a leaders' retreat in August.

This included the effect of broadening the base of the GST, lifting the rate, and doing both at once. He also showed the effect of doubling the Medicare Levy from 2 per cent to 4 per cent, as proposed by Victoria and Queensland as an alternative to the GST.

The economic forecast says Treasurer Scott Morrison is increasing the rhetoric about spending being the problem, not revenue. Kate Geraghty

Modelling not released

The government refused to release the modelling but it was believed to be similar to that prepared by the states and presented to earlier gatherings. For example, the NSW government estimated that by 2020, a 15 per cent GST rate applied to the existing base of the GST, would raise an extra $36 billion a year.

NSW estimate that dfoubling the Medicare levy would raise much more and cover the growing gap in health funding, which is forecast to reach $35 billion a year by 2030.


But the Treasurer modelling disputed this, saying ot would raise less than the GST. And it would also drive the top marginal tax rate to 51 per cent. Mr Morrison again indicated on Friday he was happy to model it but would never support it.

He emphasised repeatedly that the tax options were just that, and the government was still in the "discovery phase" of tax reform.

But Mr Morrison stressed that with falling commodity prices, the economy needed more than tax reform to boost growth.

He said the Harper review had been bogged down in a debate about changing Section 46 of the Competition Act to introduce an effects test and while that was important, there were many other good recommendations which had economy-boosting potential.

South Australian Treasurer Tom Koutsantonis said he and his colleagues were "very happy" that Mr Morrison had breathed life back" into the Harper review.

"This is the next wave of reform and it's important to do more. Let's see what the incentives are," he said.