Finance Minister Mathias Cormann is prepared to listen to other state governments after Tasmania secured a deal with the Morrison government to waive $157 million in housing debt it owed to the commonwealth.
"If other state governments around Australia want to approach us with a view of reaching an overall agreement in relation to these matters that are important to them, we are, of course, open to discussing these matters with them," Senator Cormann told ABC's Insiders program on Sunday.
Tasmanian senator and key crossbencher in the Senate Jacqui Lambie drew attention to the housing debt issue when supporting the government's personal income tax cut legislation earlier this year.
Senator Cormann said the Tasmanian state government also lobbied the federal government on the issue.
"So on a bilateral basis between the federal government and the Tasmanian Government, we've been working through this issue over the last eight weeks or so," he said.
Housing Minister Michael Sukkar, addressing reporters in Launceston to announce the decision, said the reason why the federal government was willing to take this unprecedented step to forgive the debt, is that it has confidence in the state government led by Will Hodgman to spend the money wisely.
He was adamant the state would not lose any other funding because of the decision.
"This is an additional amount of money ... that would have otherwise been paid to the commonwealth," Mr Sukkar said.
"The only stipulation is every single cent must be spent on housing ... and homelessness services."
Federal Labor - pre-empting the decision in statement on Saturday - said it welcomed the decision, having called on the government to address the state's housing crisis for months.
It says Tasmania has the highest rental stress in the country and there are 20 per cent more Tasmanians accessing homelessness and crisis housing services than two years ago.
"The state and federal governments must now ensure that money is invested immediately to provide the affordable accommodation Tasmanians need," It said.
Senator Lambie is reported as saying she had wished she had asked the government for more for Tasmania in exchange for supporting the income tax cut package.
She will hold a key vote when the federal government has another go to trial drug tests for welfare participants.
She has already said that to get her vote, federal politicians should also face drug testing.
Mr Sukkar did not expect the Tasmanian housing deal would automatically mean Senator Lambie would support the drugs testing legislation.
"No, this is a stand-alone issue that is of significance to Tasmania," he said in response to a question.
Australian Associated Press