West Australian Treasurer Mike Nahan has dismissed a report showing the state has tumbled from first to seventh among the nation's economies in just two years.
Dr Nahan says the state's economy is still strong and it would have been impossible for it not to decline after the biggest mining boom in the nation's history over the past decade.
Queensland and Western Australia have each fallen one place on the latest Commsec State of the States report list to sixth and seventh respectively but there is now little separating the three bottom-ranked economies including Tasmania.
NSW has extended its lead over Victoria as the nation's strongest economy, based on economic growth indicators such as spending on retail and equipment investment, population growth, unemployment, construction work and housing finance.
Western Australia comes last in terms of unemployment, which hit six per cent earlier this year, third on retail trade, fourth on construction work and seventh on business investment, population growth and housing finance.
"Western Australia's relative economic performance has deteriorated, the WA economy is still performing but in relative terms the other states which are actually doing a lot better at the moment including Victoria and NSW," CommSec chief economist Craig James said.
"Slower population growth and continuing high unemployment will continue to hinder activity in the state's housing market."
Dr Nahan said Commsec's report was benchmarked against the strong economic performance achieved during the commodities boom, so it did not mean the state's economy was performing poorly.
"Ten years ago we saw massive investment, 30 per cent increase in jobs and 30 per cent in household income. The other states didn't have that but we do," he told reporters.
"The growth rate has slowed but we're still, even with this adjustment, the best state to live in, the best state for investment, the best state with the strongest future."
Mr James said WA and other states and territories must take advantage of the opportunity to market their products, such as Margaret River wines our tourism, to the Asian region, which he said loved Australian products.
Opposition Leader Mark McGowan said many West Australians were doing it tough because the government did not come up with an overarching economic plan for the state outside of the mining boom-bust cycle.
"It is a great pity that during all those years of the rivers of gold flowing into treasury that they didn't set any aside for the tough economic times that are now here ... that's the Liberal Party's legacy," he told reporters.
