Yarloop future not decided

No decision has been made about the future of fire-ravaged WA town Yarloop but residents will be part of that process, authorities say.

The clean-up of Yarloop in WA's south has finally begun, three months after a deadly bushfire. (AAP)

There is no decision yet on the future of bushfire-ravaged Yarloop, the chief of the recovery process says, although Premier Colin Barnett suggests a more compact town would be preferable.

The fire in early January wiped out most of the historic town in Western Australia's south, destroying 181 properties, including 162 houses and the heritage-listed Yarloop Workshops and hospital.

After a community meeting was held in nearby Harvey on Wednesday night, state recovery controller Ken Michael said all residents from the town and surrounding areas would be invited to participate in a consultation process to help determine the future of Yarloop.

Mr Barnett said earlier on Wednesday he believed "the town will need to consolidate around the central area, rather than just have spread out houses".