The NSW economy remains the nation's strongest and the mining downturn has sent Queensland and Western Australia tumbling down the rankings.
NSW extended its lead on Victoria in the latest Commsec State of the States report, driven by economic and population growth, a healthy housing market and strong retail spending.
"Once again NSW is leading the way on many economic indicators and can claim the top ranking of economic performance," CommSec chief economist Craig James said.
"Population growth is above long term averages and dwelling starts are at almost 77 per cent above decade averages, providing solid momentum for the state's economy."
Queensland and Western Australia have each fallen one place on the list to sixth and seventh respectively, while South Australia jumped them both to be fifth.
"In two years Western Australia has gone from first to seventh in the performance rankings," Mr James said.
"Slower population growth and continuing high unemployment will continue to hinder activity in the state's housing market."
Queensland's main areas of weakness are slowing economic growth, high unemployment and low levels of construction work, CommSec said.
South Australia's job market improved in the past year, particularly in the three months to June, and if that trend continues it could translate into stronger retail spending and push the state higher on the rankings, Mr James said.
CommSec's rankings are based on each state's performance in eight key economic areas, including investment, construction work, retail spending and economic growth.
HOW THE STATES FARED
1 NSW - strong population growth, retail spending and job market
2 VIC - strong business investment and construction work, weakening job market
3 ACT - strong housing finance, improved job market
4 NT - strong construction work, weak population growth
5 SA - improved job market and housing finance, weak retail spending
6 QLD- strong housing construction, weak job market
7 WA - strong retail spending, weak job market
7 TAS - steady job market, weak economic growth
