Victoria has slumped into recession, along with South Australia, Tasmania and the ACT, as Australia's two-speed economy has sent much of the country into reverse.

The Bureau of Statistics reports that state final demand - the total spending of consumers, business and governments - fell 0.7 per cent in Victoria in the December quarter, in trend terms, on top of a fall of 0.4 per cent in September.

Large parts of Australia are in recession. Credit:AFR

Investment in the state has now fallen for three quarters in a row, falling 5 per cent in that time. Asset sales cloud over how much of that is in the public and private sectors respectively, but the Bureau reported last week that as a share of output, capital expenditure by Victorian business has now fallen to the levels of the 1990-92 recession.

Government spending on services – Federal, state and local – fell 1.5 per cent over the same six months, and even household spending declined 0.1 per cent in the December quarter.