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Consumer confidence rebounded sharply in the latest Westpac McDermott Miller survey, raising hopes that the decline in retail spending may be levelling out.
The rise, the biggest quarterly increase in the survey's 20-year history, was from a very low base. June's report had been at levels last seen in the recession of the early 1990s.
The confidence index is 104.8, up from 81.7 per cent three months ago. Any number over 100 indicates more optimists than pessimists.
Westpac economist Donna Purdue attributes the improvement to lower petrol prices, lower interest rates and the prospect of a tax cut next week.
She cautions against reading too much into the result, however.
"Consumers still have some pretty major hurdles to overcome in the form of high mortgage rates - peoplerolling off a two-year fixed rate will still be fixing at a higher level - very high levels of debt and a rising cost of living," Purdue said.
Fonterra's announcement that the new season's payout might be one-sixth lower than last season's might hit rural confidence, she said.
And since the survey responses came in, during the first half of the month, turmoil on global financial markets had intensified and the international oil price had climbed again.
The survey's respondents aretaking a rosier view of the economy's prospects over the next year, and over the next five years.
They are also more upbeat about their own financial circumstances than they were in June.
A net 27 per cent say they are worse off than they were a year ago, but that is up from a net 41 per cent in June. And a net 16 per cent expect to be better off next year, up 24 points from three months ago and the highest level for more than year.
Purdue said the survey indicated consumer confidence was significantly higher than the Reserve Bank's "rather dire" short-term view of consumer spending would suggest.
