Canberra teens are leading the country according to the 2012 Program for International Student Assessment, but the ACT and Australia are slipping when it comes to literacy in mathematics, reading and science.
The triennial PISA survey measured 15-year-old school students in 65 countries, and while Australia ranks significantly above the OECD average in all three fields, experts are concerned that mean scores have continued on a downward trend since the first PISA in 2000.
The ACT ranks among the highest in the world when it comes to reading, with mean scores putting it just above Finland, which is third in the OECD country rankings, compared to Australia's eighth.
Across the gender divide, boys universally performed worse than girls in reading, but the average Canberra girl is 49 points ahead of the average boy, the biggest difference in the country.
Canberra tops the nation in mathematics, ranking equal with Canada, the fifth-ranking OECD country, well above Australia in 11th.
But the ACT decreased by 30 score points on average in maths, with the territory behind world-leading Shanghai in mathematical literacy by the equivalent of almost three years of schooling.
The proportion of top mathematical performers in the ACT decreased 9 per cent between 2003 and 2012 and the number of students not meeting the proficiency benchmark is up 5 per cent from 2003.
When it comes to science, Western Australia outperformed the ACT by the narrowest margin, with both regions just shy of Korea, which ranks No. 2 out of the OECD countries.
There was a significant decline in the mean scientific literacy performance for ACT students; 15 points on average.
Canberra's girls and boys perform almost equally well in science and maths; boys scoring just one point higher on average, whereas WA has the largest gender difference in the country for both.
Nationally, Australia's rankings fell in all subjects, from 15th to 19th in mathematics, 10th to 16th in science and ninth to 14th in reading since 2009, based on raw mean scores.
The PISA results confirm serious inequality within the education system in Australia, a fact highlighted by David Gonski's review of school funding.
The latest results show Australia students in the lowest socio-economic quartile are performing on average at a rate equivalent to 2½ years behind the highest socio-economic quartile, while the same gap also occurred between the results of indigenous and non-indigenous students.
Gonski review panellist and former director-general of NSW education Ken Boston said Australia should compare itself in OECD comparisons to Canada, which performed significantly higher than Australia in maths and reading in the latest tests.
''Forget Shanghai and Finland,'' he said. ''Canada is the country Australia needs to compare itself with because it is culturally similar. The key thing is that it has a higher performance than us overall and a lower correlation between disadvantage and performance.''
Mean scores were highest in independent schools, followed by Catholic and then government schools, but after allowing for differences in school socio-economic status, the results were similar.
''It is evident from this report that locally and as a nation there are areas where we can continue to improve,'' ACT Education Minister Joy Burch said.
''This report shows the need for certainty with funding through the Better Schools program and a more direct approach to needs-based funding which Better Schools delivers.''
With Josephine Tovey and Anna Patty