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MELBOURNE – Spain's Rafael Nadal firmed as Australian Open favourite on Monday with another impeccable display as Andy Murray's Grand Slam bid folded before the quarter-finals.

As Nadal whipped Fernando Gonzalez to reach the last eight, 2008 finalist Jo Wilfried Tsonga was also in fine touch as he dismissed US star James Blake in straight sets.

Nadal, who is yet to drop a set, said he was playing the best Australian Open of his life.

"Probably I am playing a little bit better than last year," he said.

"I'm not saying I'm going to be in the final or semi-finals. I think the feeling is a little bit better. But in the end the important thing is the result."

Nadal's best performance here was 2008, when he reached the semi-finals before being beaten by Tsonga, but his claims on a first hard-court Grand Slam are growing.

He has been the form player of the top seeds with triple champion Roger Federer taken to five sets on Sunday and Novak Djokovic twice pushed by Amer Delic and Marcos Baghdatis.

"I am playing well, but you never know if it's going to be enough. So I hope to continue to play like this, and later we will see, because all the matches are very, very difficult," Nadal said.

Meanwhile, Murray's campaign ended in tears as he was bullied off court 2-6, 6-1, 1-6, 6-3, 6-4 by Fernando Verdasco, the stocky Spaniard with the laser serve.

Murray, who clashed with Federer and Djokovic over his status as pre-tournament favourite, refused to make excuses despite falling ill with a cold.

"If I say that I'm sick and it affected me, I know it's going to be like, 'Well, he's making excuses for losing,'" he said.

"I don't feel that was the reason why I lost. I definitely did have my chances, and he played too well."

The defeat puts on hold Murray's attempt to win Britain's first Grand Slam since 1936, and also ruins his chances of becoming world number one in the next six months.

Verdasco, who compiled the best record of any player of the early rounds, nailed 74 percent of first serves to reach his first Grand Slam quarter-final in 23 attempts.

"It was one of my biggest goals to be in a Grand Slam quarter-finals for the first time. Right now I'm so happy to make this goal possible," said the Spaniard.

In the late match, Blake didn't get a look at Tsonga's serve in the first two sets and was furious after being broken back when serving for the third.

Tsonga then dominated the tie-break, pummelling some big forehands before sealing it with an ace 6-4, 6-4, 7-6 (7/3).

"I think I'm playing better than last year," he said. "I'm stronger maybe in my head, and it helps a lot."

Earlier Nadal, capitalising on Gonzalez's four-hour marathon with Richard Gasquet on Saturday, raced through the first two sets in less than 40 minutes each.

The Chilean 13th seed mounted a brief revival in the third but Nadal hit back from 3-0 down and got the decisive break 4-3 to end it 6-3, 6-2, 6-4.

Gonzalez ousted Australia's Lleyton Hewitt in a five-set first-round match before Saturday's thrilling duel with Gasquet, when he took the 88-minute fifth set 12-10.

"Of course, I was tired. But I don't think it's the reason. I was able to run. I was able to compete today. Maybe I didn't play my best tennis, but I can run," Gonzalez said.