Local Government Minister Tony Simpson has resigned from the West Australian Cabinet, saying Premier Colin Barnett no longer has his full support.

Key points: Tony Simpson tells Premier his resignation is effective immediately

Tony Simpson tells Premier his resignation is effective immediately Mr Simpson wants the leadership issue to be resolved next week

Mr Simpson wants the leadership issue to be resolved next week Leadership speculation has been dogging Mr Barnett for months

Mr Simpson said it had not been an easy decision, but he had advised Mr Barnett his resignation from the frontbench was effective immediately.

"I have taken this step reluctantly and with a heavy heart, but it has come to the situation that the Premier's leadership and the Government's direction is no longer serving, I think, the people of Western Australia," he said in a media conference.

Mr Barnett issued a statement saying he was sorry to see Mr Simpson leave, but wished him well.

Liberal backbencher Ian Britza said the Premier had also lost his support.

"It's a sad day when a man of integrity like Tony Simpson resigns," the Morley MP said in a statement.

"The Premier has now lost my support. Will he now be stepping down?"

Colin Barnett has been dogged by leadership speculation for much of this year and was recently forced to insist that despite continuing tension within the Liberal Party, no-one was pressuring him to hand over the reins to his deputy Liza Harvey before the March 2017 election.

Talk of an early leadership transition intensified in the wake of Mr Barnett's decision to retain Dean Nalder in Cabinet after the Transport Minister was linked to a privately-funded poll showing the Government losing office at the state poll.

Some senior Liberals were understood to be deeply unhappy with the Premier's reluctance to sack Mr Nalder, and were actively considering replacing him as leader.

Mr Simpson said he hoped the leadership issue could be dealt with at a Liberal partyroom meeting on Tuesday.

"There [are] only five party rooms left before now and Christmas ... I am hoping that the party can bring that to a head," he said.

Government has 'lost its way'

"Our Government has won two elections on good policy and good leadership but I'm afraid from now on, I think now it has actually lost its way," he said.

Colin Barnett says he is sorry to see Mr Simpson leave Cabinet. ( ABC News: Andrew O'Connor )

"In more recent months I have been out and about at community events, door knocking and one thing that keeps coming back to me all the time is regards to the leadership and the party and also the direction."

Mr Simpson would not say who he would like to see replace Mr Barnett.

"I think that's a partyroom decision. It's not up the individual," he said.

"There's 46 members of the Liberal Party. Each one of them has a vote, as well as me. That decision will be made from the partyroom. I am hoping we can get to that next Tuesday."

Barnett says resignation creates new opportunity

Mr Barnett responded to Mr Simpson's resignation in a statement.

"I would like to thank Tony for his service. He has been a good minister and is a good local member," he said.

"I understand he wants to focus on winning his seat at the next election and I wish him well.

"While I am sorry to see Tony leave Cabinet, it now presents an opportunity for someone else to become a minister."

Influential WA Liberal powerbroker Upper House MP Nick Goiran said he did not agree there was a leadership issue that needed resolving.

"I totally disagree with Tony on that," Mr Goiran said.

"I think the recent poll shows that Tony is wrong on that. More than 70 per cent of the Liberal Party members support Colin Barnett as the leader."

Government a 'desperate, divided rabble'

Opposition frontbencher Ben Wyatt said Mr Simpson's resignation showed a Government in its death throes.

He described the Liberals as a "desperate divided rabble" that was no longer focused on the future of Western Australia.

"I don't think there is anybody in the parliamentary Liberal party that can bring that policy focus and unite the team at all," Mr Wyatt said.

"Tony Simpson's resignation is ultimately just the canary in the coal mine. Clearly there is a big problem in the cabinet of Western Australia."