Malcolm Turnbull and his treasurer have rubbished Liberal leadership rival Peter Dutton's "budget blower" idea to remove the GST from power bills.
Mr Dutton has floated the idea of excluding household electricity bills from the consumption tax, which would deprive the states and territories of $7.5 billion over four years.
"That would be a budget blower, an absolute budget blower," Treasurer Scott Morrison told reporters in Canberra on Wednesday.
Mr Dutton - who is positioning for another tilt at the prime ministership - has highlighted lowering power prices as one of his key focuses.
"I think that is important for pensioners, for self-funded retirees, for people that are finding it difficult to pay the bills each month," he told Melbourne radio station 3AW.
Mr Turnbull said the idea was "certainly very expensive".
"Also, needless to say, the states would definitely expect to be reimbursed," the prime minister told reporters.
"If one were to remove a big item like that from the GST pool, obviously the states would expect to be reimbursed and that would have to come from other federal taxes."
Mr Morrison warned the idea would scuttle a GST package recently struck with Western Australia.
WA's Labor state treasurer Ben Wyatt savaged Mr Dutton's "ridiculous" idea.
"Dutton's big idea is for the states to pay for his leadership ambition. Ridiculous, and now the federal Liberal leadership chaos is a clear threat to the GST 'deal' with WA," he posted to social media.
"I warn all WA federal Liberals - do not threaten the GST settlement."
The federal treasurer said the states would all have to agree to carving out the tax.
"You can make all sorts of promises about how much money you're going to spend but at the end of the day, you've got to account for it," Mr Morrison said.
Junior minister Craig Laundy, a key Turnbull supporter, questioned whether it was economically responsible to narrow the tax base.
Mr Laundy told Sky News the idea to drop GST from energy bills looked like populist - not conservative - policy.
During a separate press conference, Resources Minister Matt Canavan made it clear the GST proposal did not have the government's backing.
Senator Canavan also dismissed Mr Dutton's idea to establish a royal commission into the energy sector.
"Backbenchers can put forward policy ideas and discussions ... I welcome these contributions but it's not the policy of the government," he said.
Shadow Treasurer Chris Bowen said Mr Dutton needed to do the sums again on his "crazy" proposal.
"That will have only one result - cuts to essential services, primarily health," he said.
"These thought bubbles are dangerous because he is the alternative prime minister of Australia."
