The country's only Liberal premier has suggested federal Labor shouldn't be blamed if the commonwealth budget goes into deficit.
The Rudd government admitted for the first time this week it is willing to let its budget tumble into deficit to ward off the effects of the global financial crisis.
The federal opposition immediately accused the government of seeking a leave pass to abandon fiscal discipline.
But West Australian Liberal Premier Colin Barnett appears far more sympathetic than his Canberra colleagues.
"This is a difficult time to be running commonwealth or state treasuries," Mr Barnett said before attending the Council of Australian Governments (COAG) meeting.
"Whether it's commonwealth or state budgets, the deficit is driven more by falling revenue than rising expenditure.
"There's not much you can do about that."
Mr Barnett said Australia, like the world, was in a "fairly perilous financial position".
At a state level, property tax income was falling away sharply.
Commonwealth tax receipts, particularly from company taxes, would also fall.
The WA premier agreed there was a possibility of a commonwealth deficit.
And he suggested it was a "real possibility" that WA would also go into deficit if revenue continued to decline.
"This is a difficult time for all governments in Australia."