GST change must not hurt states: Labor

Labor says the federal government must rule out making any state or territory worse off by making changes to the way GST revenue is distributed.

A Productivity Commission draft report released on Monday recommends changes to the mechanism used to crave up revenue between the states and territories - known as the horizontal fiscal equalisation system.

"It's incumbent on Scott Morrison and Malcolm Turnbull today to rule out making any state worse off," shadow treasurer Chris Bowen told reporters in Sydney.

Western Australian has suffered under the present system, which saw its share reduced to 30 cents in the dollar at end of the mining boom.

The coalition government has made a $1.2 billion top-up payment to the state, while Labor has promised a further $1.6 billion payment should it win the next federal election.

However, the commission says providing top-ups or setting a GST floor are not longer-term solutions.