The country's south-eastern states are continuing to power the national economy as it "rebalances" away from the mining states of Queensland and Western Australia after the end of the "once in a century" mining boom.
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That is the view of Commsec, in its latest quarterly State of the States reports, which found that NSW and Victoria are the driving force behind the nation's economy, thanks to population growth and housing construction.
"This is a new version of the two-speed economy," CommSec chief economist Craig James said. "Previously, the mining states, led by Western Australia, led the way. The mining boom has ended, and now it is NSW and Victoria, which is underpinned by population and housing growth."
NSW has retained its position as the best performing economy, the survey found, with economic activity running 13.5 per cent above its average level of the past decade. This is slightly ahead of Victoria which is holding at 12.4 per cent above its average, with the ACT standing at 11 per cent above average.
"Economic performance draws people into states," CommSec's Mr James said. "We're seeing that in NSW and Victoria. What we've had is strong population growth in NSW and Victoria which has created momentum for the economy."
As a result, these two states should see economic activity remain robust well into 2017, he said.
CommSec issued its latest report ahead of the release of the latest inflation data, which is due on Thursday, with speculation that continued weak data could encourage the Reserve Bank to ease interest rates further.
One of the main drags on the national economy is Western Australia, with its performance now near the bottom of all states. It has fallen from the top-performing state to No. 7 in just two years, the survey found, due to high unemployment, low business spending, low population growth and also housing finance.
But if its level of exports were taken into account, it would rank among the stronger economies in the nation, the report found.
Queensland is ranked only just ahead of Western Australia, hurt by its low economic growth and also unemployment, according to the report.
"It's a remarkable performance when you think about it," Mr James said of the strength of the south-eastern corner of the country. "The mining construction boom has ended and now it is in the production phase, and we're seeing a pick-up driven by housing and an increase in consumer spending. The Reserve Bank would like to see more business spending, but business is still concerned by the global softness, by Brexit [the UK vote to leave the European Union], and the federal elections.
"But gradually these hurdles are being cleared, and the only one left over the next six months is the US presidential elections. Therefore, consumer and business have few reasons for caution."
The rebalancing of the Australian economy with the ending of the mining boom is proceeding "quite nicely", Mr James said. "As long as there is no external shock out of China, which is also rebalancing nicely.
"You'd have to have some confidence about the future," he said.
