Victoria has become the fastest-growing economy on the eastern seaboard, overtaking NSW for the first time since 2008.
The performance is all the more remarkable because a year ago in the lead-up to the 2014 state election, Victoria reported anaemic economic growth of just 1 per cent.
The 2.5 per cent recorded in 2014-15 puts it ahead of NSW on 2.4 per cent and way ahead of Queensland on 0.5 per cent, Tasmania and South Australia on 1.6 per cent, and the Australian Capital Territory on 1.4 per cent.
Only Western Australia (3.5 per cent) and the Northern Territory (10.5 per cent) grew faster.
Victorian Treasurer Tim Pallas said the news showed confidence had returned after years of economic inertia.
"We came to office with a commitment to get Victoria moving again and less than a year later, we're well on our way," he said.
"Since we came to power, more than 73,000 new jobs have been created, economic growth has doubled, and consumer sentiment, business sentiment, and business investment are up."
The growth rate of 2.5 per cent exceeds the budget estimate of 2.25 per cent.
North of the border, NSW Treasurer Gladys Berejiklian trumpeted the news that the state produced $513 billion in 2014-15, an all-time high.
"This is the first time ever that a state economy has reached the half a trillion dollar mark," she said. "We have worked hard over the last four years to take NSW to first place.".
But the figures show NSW is less important to the rest of Australia than it has ever been.
Twenty years ago NSW accounted for more than a third of the Australian economy – 36 per cent. It now accounts for less than a third, 31.3 per cent, an all-time low.
Western Australia, which 20 years ago accounted for 12.6 per cent of the national economy, now accounts for 17.1 per cent. Queensland accounts for 18.5 per cent, up from 16 per cent. Victoria accounts for 21.9 per cent, down from 22.7 per cent.
The biggest contributor to Victoria's economic growth was population growth. In the past year Victoria's population has swelled by 1.7 per cent, more than any other state. NSW grew by a weaker 1.3 per cent.
Victoria's construction boom saw building work surge 9.8 per cent in the year to June. So big has been the boost from building that it accounts for 0.5 percentage points of Victoria's 2.5 points of economic growth. Other industries to grow quickly were financial services and health care and social assistance.
Premier Daniel Andrews told the Committee for Economic Development Australia on Friday that money for the state's health system had to be the top priority for any funds to come from increasing the goods and services tax.
"To potentially have an outcome where just the crumbs, or just the scraps of that process, gets allocated to the thing that bought it about, a crisis in the sustainability of our hospital funding, that I don't think is reform," he said.
Although his government opposed any increase to the GST it would respect the mandate of the Commonwealth government if it won an election on a platform of a GST hike.
Victoria's living standards remain lower than those in NSW. Gross household disposable income per capita was $41,940 in 2014-15 compared to $49,030 in NSW. Western Australia and the Australian Capital Territory were both much higher with gross household disposable incomes of $51,470 and $80,000.
The ACT was the only state or territory in which gross household disposable incomes went backwards, sliding 3.3 per cent in the wake of public service job cuts and a more slowly growing economy.
Peter Martin is economics editor of The Age.
