The unemployment rate in Sydney has fallen below 5 per cent compared with a jobless rate of more than 6 per cent for the rest of Australia.
The detailed quarterly industry employment data showed that construction and real estate employment rose sharply over the year to May.
A pick-up in international student arrivals and improving interstate migration flows are boosting population growth in New South Wales and Victoria.
The NSW Budget this week showed improved operating balances and lower net debt. The NSW economy is expected to be buoyed by substantial infrastructure spending in coming years as an expected $A20 billion in proceeds from the privatisation of electricity networks is invested in new projects.
At the same time, population growth continues to slow in the resources states of Western Australia and Queensland as resources investment declines - further signs of the transition of growth drivers in Australia towards the non-mining economy.
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