Western Australia has once again claimed the top spot in the latest CommSec State of the States report, leading the nation's economic performance rankings for a fourth consecutive quarter.
South Australia also began 2025 with a bang, climbing from fourth to second, driven by solid gains across several key indicators.
The State of the States report determines which Australian state or territory economy is performing best by tracking eight key economic indicators and comparing the latest observation with decade averages (or the "normal").
"Western Australia led across several economic measures, taking first place in retail trade, housing finance, and business investment. Meanwhile South Australia ranks first on two indicators - construction work and dwelling starts," Chief CommSec Economist Ryan Felsman said.
"Overall, the economic performance of Australia's states and territories is being supported by a combination of slowing inflation, falling interest rates, rising real wages, robust government spending and a solid labour market.
"But economic growth has moderated, held back by slowing public investment, population growth and household spending. The future path will depend on the resiliency of the job market, further interest rate cuts and US President Donald Trump's trade policies."
In the July 2025 edition of the State of the States:
Western Australia leads the national performance rankings for the fourth successive report. The state is ranked first on three of the eight economic indicators - retail trade, housing finance and equipment spending.
South Australia has jumped to second from fourth after a strong start to 2025, with a pickup in consumer spending and business investment. South Australia now leads other economies on dwelling starts and construction work done, lifting from second spot in the previous quarter.
Queensland stays third, ranking second on relative unemployment and housing finance, but consumer activity in the southeast of the state was disrupted in the March quarter by ex-Tropical Cyclone Alfred.
Victoria dropped from second to fourth place. The state is in third spot on four indicators but is held back by weakness in relative unemployment. Victoria stays in second spot for retail spending with it being 10 per cent above its 'normal' levels or the decade average.
Tasmania is steady in fifth place - ranking first on relative unemployment, with the trend jobless rate at a record low 3.8 per cent in June. But the state is held back by relative population growth, which is at the weakest level in nearly a decade.
New South Wales slips back to sixth from equal fifth position due to a delayed transition from public to private sector led growth, while the ACT joins NSW in sixth, ranking first on relative economic growth, constrained by more modest public demand and weak business investment
The Northern Territory stays in eighth place despite strength in relative population growth. The decade-average method of assessing economic performance disadvantages the Top End given significant LNG construction over 2012-18 inflated a range of economic indicators. That said, the Territory has lifted its economic performance in the past 12 months.
Annual growth rates
The State of the States report also compares the annual growth rates across the eight major indicators, enabling comparisons in terms of more recent economic momentum. This quarter's report revealed:
- The commodities and tourism-focused state of Western Australia continues to outperform the rest of the nation, also ranking first on four of the eight key economic indicators. Population growth is particularly strong.
- South Australia is the big improver, also jumping to second from fourth spot, supported by a pick-up in consumer spending, business investment and construction activity.
- The Northern Territory lifts from fifth to third due to robust growth in business investment and construction activity.
- Queensland slips to fourth from second following a fall in coal and agricultural exports caused by ex-Tropical Cyclone Alfred.
- Victoria dips from third to fifth despite above-average net overseas migration, supporting household spending.
- New South Wales joins Victoria in fifth, up from sixth, with Sydney's heavily mortgaged households benefitting from interest rate cuts.
- The ACT (seventh) and Tasmania (eighth) are both being held back by weakness in private sector investment.
About the CommSec State of the States Report
The July 2025 edition of the State of the States report uses the most recent economic data available. While population growth data relates to the December quarter of 2024, other data - such as unemployment - is much timelier, covering the month of June 2025, with the majority of the other indicators using March quarter of 2025 figures.
CommSec, the self-directed broking arm of Australia's largest bank, assesses the performance of each state and territory on a quarterly basis using eight key indicators. Those indicators include economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.
Just as the Reserve Bank of Australia (RBA) uses long-term averages to determine the level of "normal" interest rates, CommSec compares the key indicators to decade averages; that is, against "normal" performance.
CommSec also compares annual growth rates for eight key indicators for all states and territories, in addition to Australia as a whole, enabling a comparison of economic momentum.
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