A West Australian business lobby says the economy can move away from construction and mining, despite rising unemployment.

WA Chamber of Commerce and Industry chief economist John Nicolaou says that while unemployment increased in the last year, it obscured the fact that there were 40,000 jobs created in that time.

Mr Nicolaou said a closer look showed that the demand for labour in Western Australia was moving towards the services industry.

“What we have seen is the demand for labour has changed,” he told the ABC.

“Traditionally over the past decade, resources and construction have been the major job creators.

“What we have seen in the last 12 months is that change quite significantly, and it has been services that have been the major sources of job creation.

“So what we are seeing is clear evidence that the state's economic base is diversifying from beyond just mining and resources to other areas, in particular the services economy which really has grown in line with the state’s population.”

The Chamber has predicted a growth rate of 4 per cent for the state's economy in this financial year.

It comes in below peak growth of 6.7 per cent growth in 2011-12.

Mr Nicoloau said there was economic work to be done to diversify the state, as it faces lowered iron ore prices.

One suggestion – a broadly popular one of late – was to increase privatisation of state assets.

“On the basis of the current price of iron ore, if that's maintained over the rest of this financial year it could potentially be a $2 billion impact on the state budget and will turn a very small budget surplus into potentially a $1.9 billion deficit,” he said.

“So this requires significant reform on that part of the government to address that challenge.

“They've made some first steps in announcing some asset sales and some tightening in terms of government spending but far more needs to be done.”

"The Government needs to start seriously considering asset sales beyond parcels of land but also in relation to government training enterprises and to see what government services can be subtracted out to the private sector, which typically is more efficient at delivering public services."