Stronger jobs growth is expected to see unemployment fall to 5.2 per cent by 2015-16, from 6.2 per cent now, and wage growth to average 3 per cent over the next three years.
Inflation is forecast to pick up but the acceleration is gradual, reaching 2.4 per cent by 2016. Interest rates are expected to lift from early next year, to be 1.7 percentage points higher by early 2016.
In the Westpac McDermott Miller survey, confidence rose among all age groups and income levels and in urban and rural regions, said Westpac economist Felix Delbruck.
The biggest increases were in the net percentage of households saying their financial situation has improved, to the highest level for six years, and in the net percentage of households expecting good economic times over the coming year, to a nine-year high.
More respondents expect their own finances to improve over the year ahead, up from a net 9.6 per cent in September to a net 12.1 per cent, the highest since September 2010.
"This is all very much in keeping with the facts on the ground," Delbruck said.
"The construction sector is ramping up and not just in Canterbury, the job market is on the mend, house and share prices have continued to rise, and rural incomes are getting a big boost from post-drought recovery and sky-high export prices."
But while the net balance of people saying now is a good time to buy a big item improved slightly on the September survey, it remains well below its peak of last June.
The net percentage of respondents saying they would spend a cash windfall rather than save it or use it to pay down debt held steady at 34.3 per cent - below the recent peak of 37.7 per cent, and possibly because of interest rate fears.
