Latest Treasury figures reveal Tasmania will lose $520 million in GST grants over the next four years.

Mr Eslake said one factor was Western Australia needing more GST due to low iron ore prices.

He said it was a “zero sum game” and where one state wins, another state loses.

“It shows [Treasurer] Peter Gutwein made absolutely the right decision last year to treat the GST windfall as a windfall, and spend a bit on infrastructure knowing it probably wouldn’t be on the bottom line in a year or two,” he said.

Mr Eslake said Western Australia received in excess of $5 billion each year for iron ore royalties.

“Western Australia is assessed directly as having enormous capacity to raise revenue because of the amount of iron ore it has and the price is was getting for it,” he said.

“They don’t need as big a share of the GST in order to be able to provide the same services as other states and territories.”

He said every share was based on the Commonwealth Grants Commission’s figuring of each state’s capacity to raise revenue. 

“Western Australia has a high service cost as well, but an enormous capacity to raise revenue, and that’s what penalises them,” he said.

“As iron ore prices come down, their capacity to raise revenue diminishes.”

Treasurer Peter Gutwein told Parliament that despite the GST hit a surplus would still be delivered in 2016-17 which was three years ahead of schedule.

“We built a budget position that can withstand shocks like sharp movements in the GST or other unexpected challenges,” Mr Gutwein said.

Mr Gutwein said there would be no additional savings measures in the May 26 state budget.

However, he said it would not be a “cash splash”.