Mr Lalich, who entered state parliament in a by-election last October, told the Champion last week that Australia should have just a federal government and local councils.

"Most local members would just become the local mayors," Mr Lalich said, who is also the Mayor of Fairfield.

Mr Rees said yesterday that Mr Lalich could have expressed his argument in a different way.

"I think Nick will concede he probably could have worded that commentary better," the premier said.

"I don't think anyone wants to see councils try to run health systems."

Mr Rees said believed there was a place for state governments and local councils.

"We don't do footpaths, they don't do health systems," he said.

"I think in Australia we've got the balance about right... given our geography.

"I think the government structure is about right."