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NSW has the fastest-growing economy in Australia, while Victoria's population growth is outpacing nearly every other state's, as record-low interest rates and falling iron ore prices create increasingly favourable conditions for the eastern states.
It means the gap in economic activity is continuing to close between the country's mining and non-mining states, with the Reserve Bank's record-low rates doing exactly what they are supposed to do: fire up the finance sector, support retail sales and boost housing construction.
The latest Deloitte Access Economics Business Outlook report, for the June quarter, says after a decade of underperformance the NSW economy is likely going to be the fastest growing economy in 2014-15, edging out Western Australia for the top spot.
It says rising property prices in Sydney have boosted household wealth and consumer confidence, and helped retail turnover to grow at the fastest rate of any state.
But the report also cautions that things will not be this easy for NSW residents in a couple of years, as surging house prices will eventually mean slower population growth and higher mortgage costs.
"At some stage there will be a butcher's bill to pay from Sydney's higher housing prices," the Deloitte report warns.
"But that's a problem for down the track. For the moment, the bubbly's still flowing."
The Deloitte report says the "cyclical pendulum" is also swinging Victoria's way, with a much-weaker Australian dollar providing a "considerable blessing" for a range of the state's businesses, including tourism and education.
"Victoria's unemployment rate has gone from well above the national average to below it, and the strong lift in job growth that has driven that fall in unemployment has been well founded ... coming at the same time as a strong lift in job vacancies."
However, Deloitte Access director Chris Richardson says despite the good economic news the condition of federal and state budgets is leaving "plenty to worry about."
"Even if you think that commodity prices will recover and that capital gains taxes will whirr back to good health, you still have to remember the policy risks," Mr Richardson has warned.
"There's still $80 billion in dispute between the states and the feds, and the state budgets don't reflect what the federal budget assumes about the level of money flowing to the states."
Official figures assume that many of the federal government's budget-saving policy measures currently sitting in the senate will shortly find themselves "unstuck" as Australia's politicians "come together to sing kumbaya," Mr Richardson says, adding: "pull the other one."
CommSec's new State of the States report, also published on Monday, confirms that the NSW economy is in top spot for overall economic performance.
It also says Victoria now ranks second-best in the country, jumping Western Australia and the Northern Territory.
Using a different methodology to the Deloitte report, CommSec's economists say Victoria is clearly the second-best performing economy in Australia now, thanks to much-stronger population growth and housing demand.
It says NSW was the top-performing state for retail trade, housing construction and population growth, but Victoria has the second-fastest population growth.
"Victoria has the fastest annual economic growth rate in the nation, up by 2.9 per cent on a year ago, ahead of Western Australia (2.7 per cent) and NSW, Northern Territory and the ACT (1.9 per cent)," the report says.
