PM called states' bluff: Morrison

It's been described as a humiliating defeat but Treasurer Scott Morrison insists the prime minister's short-lived income-sharing tax plan was about calling out the states.

Malcolm Turnbull argues the states can no longer credibly ask the federal government to raise the GST or Medicare levy after rejecting his offer to allow them to raise their own income tax.

"The prime minister called the states and territories' bluff," Mr Morrison told ABC radio on Monday.

It's now time to live within our means, instead of making "fantasy promises" like the former Gillard government did.

The only way Opposition Leader Bill Shorten could pay for the policies he was promising would be through higher taxes, Mr Morrison said.

Australian Institute of Company Directors boss John Brogden says after years of drifting into irrelevancy, last week's Council of Australian Governments meeting signalled its expiry.

He's calling for an overhaul, proposing reform targets, timeframes for delivery and an independent chairperson to oversee the process.