Solid population growth and strong job markets are driving retail spending and business investment in Victoria and New South Wales, making these states the country’s best performing economies in the September quarter, according to the latest State of the States report from CommSec.

The quarterly report measures the performance of each state and territory based on eight indicators: economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.

Victoria ranked first for four of the eight indicators, including retail spending, while NSW ranked second on six of the indicators in the latest report.

The two states have traded spots on a number of key indicators over the quarter, but both benefit from broad-based economic strength,  underpinned by population growth, construction and investment activity.

This has proved to be a boon for retailers located in Victoria and NSW, where spending was 18.1 per cent and 17.5 per cent, respectively, above decade-average levels in the September quarter.

The next best state or territory for retail spending was ACT, up 14.4 per cent on the decade average, followed by Tasmania, up 13.7 per cent, South Australia, up 11 per cent and Queensland, up 9 per cent.

Northern Territory recorded the weakest result on retail spending, up 4 per cent on the decade average, below Western Australia with 5.8 per cent growth.

This is the third and sixteenth time respectively that Victoria and New South Wales have taken the top spot since CommSec introduced the report in October 2009.

“When we compare the latest readings with decade averages, it remains a close race between Victoria and New South Wales,” CommSec chief economist Craig James said.

“Victoria maintained top spot on relative economic growth and in New South Wales the trend unemployment rate of 4.3 per cent hasn’t been bettered in monthly records going back to 1978.”

CommSec noted that strong job markets in both Victoria and NSW will continue to provide support for local economies, but home building will soften in the period ahead. Four of the capital cities recorded annual declines in home prices, the same number as for the year to September.

Inflation rates and annual wage growth are historically low across capital cities.

The ACT was the third best-performing economy in Australia in the September quarter.