New South Wales Premier Gladys Berejiklian has taken aim at the ACT, saying it should not have the power to hold other states "hostage".
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Ms Berejiklian singled out the territory during a special address at the National Press Club in Sydney on Wednesday afternoon, while criticising the "clunky and mediocre" nature of federal-state relations.
"Too often I have witnessed, in frustration, ministerial council meetings where the ACT - apologies to all of you - with a population of around 400,000, not much more than Blacktown in Western Sydney, has an equal voice with a state of 7.7 million people," she said.
"The people of New South Wales should not continue to be held hostage to a lowest common denominator approach that privileges the parochial interests of small populations more than it should."
But ACT Chief Minister Andrew Barr hit back at Ms Berejiklian's comments, saying that "far from a roadblock, the ACT has actually been a leader in many areas" and he found it "a little odd" the NSW Premier felt the need to attack the ACT.
"The ACT plays a constructive role in COAG and have certainly never held any other jurisdiction hostage," he said.
"Because we're the national capital and a third of our residents are federal public servants, the ACT is - if anything - more focused on what is good for the nation than any other jurisdiction."
"While I'm disappointed Gladys Berejiklian has now stooped to this, I'm sure it won't hurt our long-term relationship."
Ms Berejiklian was heavily critical of the Council of Australian Governments, a peak forum which includes the Prime Minister and first ministers from all states and territories.
"Some matters do and should require consensus, but many do not," she said.
"We need to be real to the fact that the size of population and extent of economic resilience differs vastly across [Australia].
"Too often COAG is a brake on reform and in some cases a blockage and the challenges of COAG have become more acute over the past decade."
The Council of Australian Governments was established in 1992 with a view to managing matters of national importance that needed countrywide cooperation.
But Ms Berejiklian said the model had become wrapped-up in red tape that was hindering, rather than helping, economic growth.
"This is not sustainable. The agreement is too prescriptive, too complex and in the end there is little ability to enforce the terms of the deal we want."
