One of the nation's most powerful unions has offered to cut labour costs by up to 20 per cent in Western Australia's construction sector.

Under a proposed new deal the Construction, Forestry, Mining and Energy Union (CFMEU) would cut wages, redundancy payouts, and other fees and charges due to a downturn in the industry.

The Master Builders Association's Kim Richardson said the boom times were over and unionised construction firms were no longer competitive with non-union companies.

He said the proposed Enterprise Bargaining Agreement (EBA) would change that.

"[In] my estimation it offers a saving of about 20 per cent in labour costs," he said.

"The CFMEU is being realistic is recognising again that its enterprise agreement, the current one, is unsustainable."

The CFMEU's Mick Buchan said the leaked document is only a proposal, but he concedes the union is prepared to negotiate.

"The indication that I get is that we have to see some change," he said.

"Unfortunately, over the last few years we have seen a race to the bottom [on pay and conditions].

"Our members know just where the industry sits at the moment. The intention of the CFMEU is to do the best we can for our members."

Mr Richardson said the union had realised it needed to change its work practices.

"The CFMEU enterprise agreements for the past 10 to 15 years have been significantly generous to the point they have been unsustainable in the commercial market," he said.

"In fact, what the union was doing was making certain that those employers who employ union members could not win work, therefore [do] not employ union members."

He said unionised construction firms had been losing work to non-union companies.

"Really, I think it's a question of recognition of market forces in the commercial construction sector and the recognition by the union that it actually has to play within the market and can no longer go it alone."

Pay and conditions too generous: CCI

The head of the Chamber of Commerce and Industry (CCI), Deidre Willmott, said the pay and conditions of CFMEU workers were far too generous.

"We do see that costs are an ongoing issue for the West Australian economy, and construction is a major cost across the economy so it is important that we reduce those costs," she said.

"The CFMEU is recognising that demand drove wages unrealistically high over the last decade, and that there is a need to reduce those wages for the future."

Ms Willmott said there needed to be further cost reductions.

"We would say that they need to reduce their wages further to make sure that their members remain competitive within the market," she said.

"CCI's understanding was that those conditions were 30 to 40 per cent above market rate, so they needed to come down," she said.

"The CFMEU's current EBA is still above market rates so we will probably see further reductions."

Mr Richardson from the Master Builders Association said: "I think it's a step in the right direction by the union, but from my position working with the Master Builders the enterprise agreement still contains other non competitive issues, such as 26 rostered days off a year and other unproductive practices.

"It's a two part mix; one, making a concession in labour costs and two, allowing the employers to be more productive and that's where the weakness still is within the union's enterprise agreement."