CommSec State of the State’s report: Western Australia is best economically as eastern states left behind

West is best again in economic circles but big gains made on the other side of the Nullarbor have surprised economists and left eastern states languishing.

A boost in housing construction has propelled South Australia to second position, above Queensland and Victoria, in CommSec’s latest State of the States report released on Monday.

Western Australia remains the nation’s top performer for the fourth straight quarter with strong returns on retail spending and business investment, but an upheaval could be on the horizon.

“We are seeing Western Australia lose a little bit of momentum,” CommSec chief economist Ryan Felsman told AAP.

“It’s been growing at a breakneck speed the last two or three years, and the reason for that is population growth has been the highest for some time.”

The report ranks Australian states’ economic performance based on eight key indicators including economic growth, retail spending, unemployment, population growth and dwelling commencements.

Some states, such as WA and Queensland, have natural resource advantages over the others, while smaller jurisdictions such as Tasmania and the Northern Territory have naturally lower economic capacity due to their smaller populations.

The report gauges how each state economy is performing relative to its long-term average.

Leading the nation in construction and dwelling starts propelled SA past the eastern states, where housing affordability problems continue.

Dwelling investment in NSW, Victoria and the ACT remains roughly the same as it was a decade ago, but Mr Felsman said general improvements in the economy should improve prospects nationwide.

“Heavily mortgaged households are feeling the benefits of two interest-rate cuts, with more on the way,” he said.

“If you add to that better real wages growth, cost-of-living pressures are easing and that should lead to a pick-up in household consumption.”

Queensland maintained its third-place standing but its growth was hampered by reduced coal and agriculture exports due to the impacts of Tropical Cyclone Alfred.

Higher relative unemployment pushed Victoria from second to fourth, while Tasmania, NSW, the ACT and the Northern Territory rounded out the rankings respectively.

STATE OF THE STATES RANKINGS

1st: Western Australia, unchanged

2nd: South Australia, up from fourth

3rd: Queensland, unchanged

4th: Victoria, down from second

5th: Tasmania, unchanged

=6th: NSW, down from equal fifth

=6th: ACT, up from seventh

8th: Northern Territory, unchanged

* All changes compared to the CommSec April quarter report