A rebounding West Australian economy is forecast to bring jobs and long-awaited wages growth, but the weight of government debt remains a threat to the state's recovery, according to the WA Chamber of Commerce and Industry.

The CCI’s biannual forecast for the state’s economic outlook is optimistic, predicting it will grow by 0.9 per cent this year.

“This will be welcome news to business and families following a year of negative economic growth that has put pressure on investment, wages and job creation,” CCI’s chief economist Rick Newnham said.

The CCI’s Outlook report, released on Thursday, highlighted several key indicators which show WA’s economy is on the mend, including a four-year high in consumer and business confidence and the creation of 15,000 full-time jobs.

“Our state’s falling business investment has been a weight pulling down WA’s economy and restraining jobs growth,” Mr Newnham said.

“Once business investment stops falling and returns to growth, which we expect will be this year, the whole economy will begin to pick up.”

Unemployment is predicted to improve slightly, falling from 5.7 per cent to 5.6 per cent next financial year, on the back of more part-time jobs.

“Flexibility in the labour market has taken the sting out of the economic pain in WA after the mining construction boom, and the creation of part-time jobs has helped to prevent a major fall in household spending,” Mr Newnham said.

As unemployment falls wages growth is expected to rise by 1.7 per cent this financial year, increasing to 2.4 per cent growth in 2018/19.

WA remains the nation’s export powerhouse, with exports predicted to increase from 35 to 41 per cent this year due to a rally in commodity prices and boost in shipped LNG and iron ore.

However, Mr Newnham warned the “dark clouds” of the state government’s debt and deficit continued to threaten its economic recovery.

“For business confidence to turn into job creation, WA businesses need to feel confident that the state government will maintain the current investment climate,” he said.

By Sophie Moore