Australian Capital Territory is Australia’s best economy

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It's official. The Australian Capital Territory is now the best performing economy in Australia after eclipsing West Australia, according to the latest data from CommSec State of the States.

The report cited ACT's low unemployment rate, rapid population growth and healthy housing and construction markets to make it the most prosperous states in Australia, a title formerly held by resource-rich state WA.

"The ACT economy may be small, but effectively all engines of growth are firing. The ACT economy continues to outperform on most measures, but Western Australia has slipped back towards the pack while the NSW economy has made up ground," CommSec chief economist Craig James said in the report.

James added that WA's economy declined recently because of problems in the housing sector, while New South Wales reported a considerable improvement in prospects due to above-average population growth and increased business investment.

Business activities in NSW climbed 33% above its long-term average. James believes that population and employment growth were responsible for the rebound. However, investment in housing and commercial construction is lagging.

In Queensland, CommSec reported a decline in the construction industry, although the recent flooding is expected to boost construction activities as the government and private sector begin to rehabilitate the state.

Victoria continues to outperform NSW, with a strong housing market and growing employment, but business investment is weak.

"NSW has [the] potential to lift from the bottom of the economic leader-board if faster population growth can be translated to increased construction and overall economic growth," the report states.

The report added that NSW has the biggest potentials in all of Australia because of solid investments in the mining and engineering sectors.