Victoria has eased ahead of New South Wales to number one spot in CommSec's "State of the States" economic rankings, while Western Australia continues to lag in last place.

State of the states at a glance: 1. Victoria: Fastest population growth, strong home building 2. NSW: Ranked first in retail spending and unemployment, housing finance weighs 3. ACT: Ranked first for housing finance and equipment spending 4. Tasmania: Fastest relative population growth, strong home building 5. Queensland: Population growth has increased leading to a rise in home building 6. SA: Unemployment is the lowest in five-and-a-half years, equipment investment down 7. NT: Economic output high, but weakest retail, population growth, home loans and home building 8. WA: Weakest jobs market and construction work, equipment spending improving

It is the first time in almost four years that NSW has not been number one, and the first time in the history of the report that Victoria has held top spot.

However, CommSec's chief economist Craig James said the gap between the two remained narrow.

"Looking forward you could see them changing positions over the next 12 months," he told ABC News.

People power growth

The main change has been weaker housing market indicators for NSW, notably in Sydney, while Melbourne's property market has so far held up better, largely due to Victoria's stronger population growth and construction.

Mr James said high population growth had been the fundamental economic driver for the best-performing states.

"When you've got more people coming to the states from other states and territories, from overseas, that creates demand for homes, creates demand for infrastructure, and that leads to stronger retail spending, more people in employment," he explained.

"So that's where the momentum is being provided from, not just in terms of Victoria and New South Wales, but basically in terms of the south-east of the country, including the ACT and Tasmania."

Victoria's Treasurer Tim Pallas said the state's growth was assisted by government investment, although much of this infrastructure spending is required to cope with the increasing population.

"We're growing as an economy much faster than the state has traditionally done and really what this means is, on a wide range of economic indicators, they're all confirming what we already know, and that is Victoria is the nation's economic powerhouse," he said.

"We've been propelled by things such as our unprecedented investment in roads and transport, hospitals and schools, it's all paying dividends."

Tasmania's annual population growth is the strongest for eight years as many mainlanders have moved there for its lifestyle and relative housing affordability.

Mr James said it was possible that Victoria and New South Wales could eventually be supplanted at the top of the rankings.

"Look out over a year, or perhaps two years, and you could see economies like the ACT and Tasmania moving their way up," he said.

"But there's still a fair gap between Victoria and New South Wales and the other state and territory economies."

Weakest economies showing signs of improvement

Mr James said Queensland and South Australia ranked close together, well below the top four but comfortably ahead of the two laggards.

The Northern Territory and Western Australia continue to lag well behind the rest of the country as massive mining investment booms continue to unwind.

However, Mr James said the two regions were starting to see some benefit from a recovery in commodity prices, which was rekindling interest in mining exploration and development.

"Demand for our mining commodities here in Australia is strong, prices have been rising, and that's creating demand for labour and, in fact, in many parts of the country that labour demand isn't being met," he said.

With the laggards showing tentative signs of recovery and the leading states remaining strong on key measures, Mr James said his report showed there was no recession on the horizon for Australia.

"We've had 27 years of expansion in Australia and that doesn't look as though it's going to end any time soon," he concluded.