WA's ratings outlook remains negative

The ratings outlook for Western Australia remains negative and there is a one-in-three chance of a downgrade over the next two years, Standard & Poors says.

But the agency says it could revise the outlook to stable if the government achieves its savings measures.

Further weakening of the budget would lead to the state running persistent operating deficits on a cash basis, it warns.

"Such a budgetary deterioration could arise from further unfavourable movements in iron ore prices relative to the assumptions used in the fiscal year 2016 budget, or the government significantly under-achieving on the savings measures that it has announced in recent years," the agency said.

"Such fiscal slippage would also likely lead to the state's tax-supported debt rising to more than 120 per cent of operating revenues, unless asset privatisations progress as planned."