The WA Government's planned gold royalty rate hike is dead after Liberal MPs voted against the budget plan, aimed at raising almost $400 million over four years.

At a partyroom meeting following a protest against the change by gold industry representatives on the steps of Parliament House, the Liberals agreed to block a move to raise the gold royalty rate from 2.5 per cent to 3.75 per cent.

The McGowan Government was relying on the Liberals' support to keep the royalty increase alive after the Nationals and crossbench said they would not support it.

However, Opposition Leader Mike Nahan said the unanimous decision of the partyroom to block the change was based primarily on projected job losses.

"This royalty increase would have imposed a significant risk to jobs in the industry," he said after the meeting.

"It is our view that the McGowan Government did not seek or have a mandate to increase the gold rate."

Dr Nahan said it had been a "tough decision".

The gold industry campaigned heavily against an increase in royalties, saying it would cost jobs. ( ABC News: Eliza Laschon )

But he said the party did not believe the money raised would be used to reduce debt or deficit, and suspected it would instead have gone towards funding $5 billion in fresh election commitments.

Liberals are 'financial vandals': Premier

Premier Mark McGowan blasted the Liberals over the move during Question Time in Parliament.

"The financial vandals in the Liberal and National parties who left this state in such a powerless financial position are now going to use their numbers in the Upper House to make it worse," he said.

"It is a disgrace that the Liberal and National parties are prepared to defy all convention, defy all convention and vote down government revenue measures in the Upper House.

"All the Liberal Party is doing is engaging in budget wrecking, just like they did in government.

"It is disgraceful, it is embarrassing."

WA Treasurer Ben Wyatt, who was booed at this morning's protest, warned the Liberals would be to blame if the state suffered another ratings downgrade.

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"If there's any credit rating downgrade, Leader of the Opposition, I'll be coming to you and wrapping that around your neck," he said during Question Time.

"Because you are responsible for any downgrade, your leadership has been found wanting and you are responsible for the mess that we've been left."

Dr Nahan acknowledged there had been a parliamentary tradition of not blocking money bills, but denied the Liberals were "budget wreckers".

"We took [the decision] reluctantly, but jobs, broken promises and failure to meet reductions in debt and deficit trumped the issue," he said.

Chamber of Minerals and Energy [CME] chief executive Reg Howard-Smith welcomed the decision, saying the group had spent about $500,000 on its campaign against the royalty increase.

However, he said the CME "sincerely hopes" household fees and charges do not rise as a result of the decision by the Liberals.

The royalty hike was to intended to take effect from January once the price reached $1,200 an ounce, and was a central plank of Labor's budget repair measures in the face of a projected deficit of $2.3 billion this financial year.

But the industry argued it would cost thousands of jobs, close mines and hinder future investment.