Australia's states New South Wales and Queensland could make a comeback in the second half if benchmark rates remain at their current levels, the June report of CommSec State of States said on Monday.

The states of NSW and Queensland will remarkably benefit from the high population growth and the firm housing lending, the June report of CommSec State of States said on Monday.

In spite the decline in the general consumer sentiment, the property markets in NSW and Queensland will get a boost in the coming months as the re-building efforts after the floods and other natural disasters continue.

"Looking ahead, the NSW economy should benefit in coming months from relatively high population growth and firm housing lending," the June quarter report says.

"And Queensland should benefit from rebuilding activity after the floods and cyclones in early 2011."

It noted that an extended period of interest rate stability could provide the momentum that NSW and Queensland economies both need - injecting interest in the housing sector.

CommSec said that Western Australia has the strongest economy, but the other states are perceived to bounce back if consumers will finally be encouraged to spend more and shed off the conservative attitude that pulled down the sales of retail and the services industries.

CommSec chief economist Craig James noted in the report that if the Reserve Bank went through with Westpac's prediction for an imminent rate cut, this would lead to housing sectors across the country to pick up.

But James does not expect the RBA to do so, tipping the central bank will lift rates in November as the economy improves in the second half.

"The Reserve Bank would be of the view that a hike would lead to higher prices and potentially rents, which would increase inflation," Mr James said.

In a related report of smartcompany.com.au, Western Australia became Australia's top performer and beat the Australian Capital Territory.

CommSec said a rise in the territory's jobless rate raises questions about whether its strong economic performance can be maintained.

The report, which looks at eight key economic indicators to measure the performances of Australia's states and territories, says the top three economies across Australia were WA, ACT and Victoria. Rounding out the pack were South Australia, Tasmania, Northern Territory and Tasmania together, New South Wales and then Queensland.

In order to measure how the economy was tracking compared with normal, CommSec used averages over the decade. The eight indicators were:

  • Economic growth
  • Retail spending
  • Equipment investment
  • Unemployment
  • Construction work done
  • Population growth
  • Housing finance
  • Dwelling commencements

While CommSec expects WA to continue to report solid growth on the back of Chinese demand for its resources, it warns that residents of the state are not sharing the benefits equally.

"Provided China continues to grow then the Western Australian economy will continue to thrive," the report says.

"But just as the broader Australian economy is multi-speed, so is the situation in Western Australia. Mining areas are thriving but weaker housing activity is creating challenges in Perth and non-mining regional towns."

On house prices, the broker expects them to track sideways rather than fall for the remainder of 2011.

"Wages are expected to outpace prices over the remainder of 2011," CommSec says.

"Housing markets are generally undersupplied with stock.

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