The revelation came on ABC local radio today, prompting astronomy boffins to flood talkback lines to vent their outrage.
Peter Birch, who was the observatory's senior astronomer for 35 years until 2005, told the station that the decision had "been in the wind" for several months.
"I think it's an absolute disgrace that the state government is going to cut out science at Perth Observatory altogether - it's not just being cut, it's being cancelled," he said.
"The reason that it's so important that Perth Observatory does science is that it's located in an isolated place in the southern hemisphere.
"The next observatory to the east is on the east coast of Australia and the next observatory to the west is in South Africa, so we fill a big hole as far as longitude and time goes in astronomy.
"If you take away the expertise of the staff that work there, it's lost forever because they'll have to go elsewhere to find work."
Mr Birch estimated that the state government would save a few hundred thousand dollars a year by axing research at the observatory and reducing it to an astronomy "museum".
The observatory falls under the portfolio of Environment Minister Bill Marmion, who was not immediately available for comment.
Some talkback callers said they were so angered by the announcement that they would not vote for the Liberals at the March 9 election, while others questioned the wisdom of the state government's Future Fund at a time when it is cutting costs across the public service.
The Bickley-based Perth Observatory, Western Australia's oldest observatory, in 1977 played a key role in discovering the rings around Uranus, which were not visible from the northern hemisphere.
It also accounted for 10 per cent of images taken of Haley's Comet in 1986.
"It's just an example of how important it is to have observatories all around the world," Mr Birch said.
Source: Australian Associated Press