Despite state debt at record levels, the Premier has announced plans to build an underground rail tunnel from Bayswater to the airport - at a cost of $2 billion.

Speaking at the Liberal Party state conference on Saturday, Colin Barnett said that in the future the state's major building projects would be funded by selling off state assets and not by increasing debt.

The big ticket announcement from this year's state conference was the underground rail link from Bayswater to the airport and on to Forrestfield.

It will involve tunnelling for 8 kilometers. Two tunnels will run side by side from Bayswater railway station under the Swan River to Belmont and then underground again to the airport and on to Forrestfield.

The journey time from the city to Forrestfield will be just 20 minutes.