Western Australia is not facing a recession despite a cataclysmic slump in commodity prices, according to well-known business leader and Macquarie Group state chairman Mark Barnaba.

Speaking at a business event on the state of WA's economy, Mr Banaba said he thought oversupply in the commodity markets had started to reduce and could lead to more stability going forward.

"Where it stabilises comes down to supply and demand, I think our issue is one more of supply than demand, demand as it increases is more gradual but supply is more lumpy," he said.

"Have we bottomed? It comes down to individual commodities, my personal view is if we are not there already we are very close to being there."

While Mr Barnaba was not willing to predict the bottom of the slump, he was confident Western Australia would not fall into recession.

"My own view is that it will return," he said.

"West Australians are really resilient people and if anything there is more risk to the upside than the downside in this state.

"Calling the bottom, I think Western Australia will avoid recession, I think Australia will avoid recession, there is no data to suggest right now that we are in that situation."

Wage policy set in stone

The commodity price rout has wreaked havoc for the State Government.

While the pace of the mining investment boom was always going to slow down as projects shifted from construction to production, the Government was not expecting the steep fall in commodity prices that followed.

It had instead expected a big funding windfall as completed projects began to generate a steady stream of royalties.

"We were going to experience a downsizing, a shifting of gear, three gears at a time," Treasurer Mike Nahan told the event.

"Then the commodity gods hit us.

"Now I know there are some Nostradamuses out there that saw this coming. Most of them saw it coming, after it came."

Dr Nahan told the conference the Government was now grappling with the fall-out from the mining boom, where it was forced to compete with the mining industry and pay big wages to keep public servants on its books.

"By far the largest growth of use of that temporary revenue went into public servants, went into wages and conditions and made them the highest paid in the country," he said.

"Teachers....some 25 to 30 per cent higher than senior teachers in Victoria and police and nurses and orderlies and doctors - you name it - we're the highest paid."

In an effort to deal with boom-time wage expectations, Dr Nahan confirmed the Government would be capping public sector wage rises at 1.5 per cent a year, instead of at Perth's forecast CPI.

"It is a reasonable request for the times that we live in, when we had the money, when we had to do it, we paid them and we paid them well, right now our circumstances have changes," he said.

"It's a reasonable offer, go out to the private sector, talk to your neighbours see what they're getting."

Unions had accused the Government of industrial relations treachery after introducing the cap and warned of industrial action in the lead up the state election next year.

The Treasurer said if unions did not like the offer they could take it to the Industrial Relations Commission, but warned the Government would have to cut jobs if it was forced to pay anymore.