By Anhar Khanbhai

Victoria is poised to be the weakest performer of the mainland states next year, and could miss its promised Budget surplus as the economy stalls, according to new economic forecasts.

A report by National Australia Bank on the states' health says rising job losses, falling property values and a sharp drop in business investment will undermine the economy, it says.

NAB economist Michael Creed said Victoria's claims to be the best performing of non-mining states have "well and truly" come to an end.

Traditional drivers of Victoria's economy, property prices and business taxes, have weakened and the Government will struggle to post a surplus in the May Budget. NAB tips property prices will fall 1.3% this year.

"Victoria's fiscal outlook is somewhat optimistic as all of the key drivers have weakened since the mid-year review," Creed told news.com.au.

"The fall in stamp duty and land tax revenue could alone push Victoria into an operating deficit in 2011-12 and 2012-13."

He said the state would avoid a technical recession but would "underperform" the national average, with only "weak growth" in the next two years.

NAB is forecasting gross state product, the key measure of economic growth, will be only 2 per cent this year, well below the forecast national GDP of 2.9 per cent.

Victoria's jobless rate is tipped to be Australia's highest, barring Tasmania, at 5.6 per cent in 2012 and 2013, while the national jobless rate is expected to be 5.1 per cent next year.

NAB's research shows structural changes to the economy caused by the strong Australian dollar are hurting Victoria more than other states as manufacturing and the services sector have gone into reverse.