Western Australian Premier Mark McGowan has called Clive Palmer the nation's "greatest egomaniac", telling the billionaire to drop his case against his state government over its border closures.
Prime Minister Scott Morrison has written to Mr McGowan saying the Commonwealth will no longer participate in the case, after taking into account the changed state of the coronavirus pandemic that has worsened since the matter was first brought to court.
Mr McGowan thanked the prime minister for his letter and for listening to his government and the people of WA.
"I'm very grateful the Commonwealth has pulled out," Mr McGowan told reporters in Perth on Sunday.
He said Brisbane-based Mr Palmer, who leads the United Australia Party, should also withdraw and is prepared to fight him in the High Court if he doesn't.
"He is showing himself at this point in time to be Australia's greatest egomaniac," the premier said
"Mr Palmer can now solve this matter by withdrawing his action. He is not acting in the interests of the people of Western Australia, he is only acting for his own interest."
The Queensland mining magnet argues WA's border closure is unconstitutional and damaging trade, while Mr McGowan has said it was necessary to protect WA residents and based on expert health advice.
A four-day hearing in the Federal Court in Perth concluded on Friday, with WA's Solicitor-General Joshua Thomson saying in his closing submissions that no community transmission in the state since mid-April showed the closure was working.
Justice Darryl Rangiah reserved his findings and the matter will ultimately be decided by the High Court, with a judgment expected around October.
In a statement issued on Saturday, Mr Palmer indicated he had no intention of withdrawing from the court action.
"In the coming weeks the Federal Court will make their determination on the facts and all Australians will be better for that decision," he said.
"No one wants to expose Western Australians to harm from the COVID-19 virus. A determination on all these issues can only benefit the community."
Queensland Premier Annastacia Palaszczuk, who's been tough on the border issue, said such legal challenges were "ridiculous".
"I cannot for the life of me understand why someone like Mr Palmer wants to put everything we have done at risk," she told reporters in Brisbane.
"Everybody should respect that states have a job to do to protect their families."
Mr Palmer launched the legal action in May after he was denied an exemption to enter WA.
Federal Opposition Leader Anthony Albanese said the prime minister needed to better explain why he joined Mr Palmer's legal action in the first place and why he has now withdrawn that support.
"It was always opportunistic for him to join Clive Palmer who was so supportive of the Liberal National Party during last year's (federal) election," Mr Albanese told reporters in Sydney.
WA has banned anyone from entering the state unless they have an exemption or special pass. Those granted passes for compassionate reasons or other grounds have to self-quarantine for 14 days after arrival.
Australian Associated Press