The Westpac McDermott Miller consumer confidence index has risen to its highest level since September 2009, when the economy experienced its first burst of recovery, Westpac said.
Westpac said the index for December was at 120.1, up 4.8 points from the last reading, taken in September.
The bank said consumers have become much more optimistic about the economy and more upbeat about their own finances.
"If any more evidence was needed that the economy is now in recovery mode, this is it,'' Westpac said.
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"In fact, people are the most upbeat about their finances that they have been in six years, and economic optimists now outnumber pessimists but the widest margin since December 2004,'' Westpac said.
But the bank said there was a note of caution in what is otherwise a very positive report, mostly related to housing. "With house prices marching steadily higher and restrictions on low equity borrowing now in place, the hurdle to home ownership has risen,'' it said.
"Meanwhile, talk that interest rates will rise next year may have made homeowners more uncertain about future property values and their own future mortgage payments,'' Westpac said.