A strong jobs market and low unemployment levels has led the ACT to become the second-best performing economy in the country.
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The latest CommSec State of the States report revealed the ACT rose from third to second place in rankings of state and territory economies, only behind Tasmania.
It's the highest ranking for the ACT economy in the quarterly reports in more than three years.
A key factor behind the rise in economic performance has been relative unemployment levels, with the ACT being the only jurisdiction in the past quarter to record a drop in unemployment levels, despite the impact of COVID-19
Unemployment in the ACT fell to 3.8 per cent, which is 4.2 per cent lower compared to the average unemployment figure over the past decade.
CommSec chief economist Craig James said smaller jurisdictions were the big winners in the latest report.
"ACT, South Australia and Western Australia were the big improvers, whereas the big states lost ground," Mr James said. "The bottom line for the ACT's strength has been in the jobs market.
"If there's more people getting jobs, then there's confidence in the jobs sector and that has a knock-on effect on retail and housing."
The ACT's rise in the rankings among the jurisdictions came at the expense of Victoria, which fell to third place.
Victoria's fall to third place was its lowest ranking in the past three years.
NSW and South Australia were tied for fourth, then followed by Queensland and WA for equal sixth and the Northern Territory in eighth.
Mr James said coronavirus restrictions and lockdown measures in Victoria meant it would take a while for the state to recover.
"Victoria's relative success in containing the virus recently will enable some reopening of the economy, but businesses have been hit hard by the closures, and it will take some time to get back to a degree of normalcy," Mr James said.
Economic growth in the ACT grew by 4.9 per cent during the year to June, and is up by 20 per cent compared to the decade average.
While the impact of coronavirus had brought many shifts to the job market, Mr James said the stability of the federal and ACT public had lessened the impact in Canberra.
"There has been consistency from the ACT," Mr James said.
Victoria still leads the country for relative economic growth. Retail spending is also on the increase in Canberra, recording an annual growth of 15 per cent. Construction activity remained stable in the latest report with the ACT staying in fourth position, while being more than 5 per cent above the decade average.
In the past year, the number of new home loans issued increased by 36 per cent, with the ACT the second-best performing jurisdiction, only coming behind Tasmania in the report.
Mr James said the ACT economy has been more protected than other jurisdictions, due to less reliance on international arrivals compared with larger states.
"If anything, the ACT will benefit in coming months from more people travelling domestically," he said.
"The ACT has managed it well in terms of finances and stability in the public service and has had good success in controlling the virus."
Despite the ACT's climb in the rankings coming at the expense of other state's, Mr James said the ACT's economy had been stable across a number of years.
"When you look back over time, you certainly see a degree of consistency in terms of the ACT," Mr James said.
"You have to go back until at least five years ago to find the ACT in a lower position than second or third."
Population growth in the ACT is slowing, however, with recent levels 41 per cent down on the decade average.
The ACT was third last when compared to other jurisdictions on population growth.
"A few years back, the ACT's population growth was quite strong, but it is starting to slow," Mr James said. "Population growth does create demand for more homes and the changes that happen today may not have an impact until 12 months down the track."