Western Australia is still the best performing economy in the nation but the Northern Territory is now closing the gap, according to a new report.
The CommSec State of the States report shows that the economies of Western Australia and the Northern Territory were the strongest in the nation and likely to remain that way in the near future.
"Western Australia remains Australia's best performing economy, ahead of the Northern Territory and both economies are likely to hold their top positions over 2013, underpinned by rising population growth," the report said.
The study analysed the economies of each of the states and territories using eight key indicators.
These include economic growth, retail spending, equipment investment, unemployment, construction work completed, population growth, housing finance and dwelling commencements.
Each state and territory's readings were then compared with their decade averages.
Western Australia led the way on construction work, retail trade, population growth, construction work completed and equipment investment.
It was also the second strongest on retail trade and housing finance and third on unemployment.
Northern Territory rated the highest on overall economic growth and unemployment and could become the best performing state if its rate of improvement continues.
"The Northern Territory does have momentum on its side and has potential to overtake Western Australia at the top of the leader-board especially with faster growth in investment and population growth," the report said.
The ACT ranked third with strong dwelling starts and population growth but while its unemployment rate was still lower than most states, it was above its own average.
"The ACT remains the third strongest economy, but the softer job market could have knock-on effects across the economy, especially in retail trade and housing," the study said.
"But strong real wages will provide solid support."
The report said there was very little separating the three largest states with Victoria, NSW and Queensland each having different strengths and weaknesses.
Victoria was supported by its housing sector but was losing momentum.
Queensland ranked highest on construction work and equipment investment but had historically high unemployment.
This contrasted with NSW which had historically low unemployment but low economic growth.
The report said there was a sizeable gap to South Australia but rising population growth could boost housing demand, non-residential and engineering investment and retail growth in the future.
Tasmania was still languishing at the bottom of economic performance table lagging all other economies on economic growth, retail trade, population growth and construction work done.
Its best ranking was fourth on equipment investment.