Consumer sentiment in Australia has risen by over a third since May this year, according to the latest measurements released this week by the Westpac Bank.
The Westpac-Melbourne Institute Consumer Sentiment Index surged by 5.2 per cent in September 2009, from 113.4 in August to 119.3 in September.
This is the highest level of the Index since July 2007.
The Index has increased by 34.4 per cent over the last 4 months - the largest 4-month increase in the 35-year history of the Index.
Westpac's Chief Economist, Bill Evans, said that the survey shows clearly that the standout story for consumers is relief that the economy has avoided recession and that expected job losses have not materialised.
"For consumers, the good news on the economy is `drowning out' any warnings on rate rises", Mr Evans said.
The dominant news topic that respondents recalled in the month was domestic "economic conditions".
This topic was recalled by 69.2 per cent of respondents compared with only 32.6 per cent of respondents who recalled "interest rates". Assessments were overwhelmingly positive, with approximately 70 per cent of respondents assessing current economic conditions as favourable compared with approximately 35 per cent in June.
"Given the extensive media coverage of likely rate hikes it is surprising that respondents are relatively evenly divided on their assessments of interest rate news", Mr Evans said.
"That resilience to the rate outlook is exemplified by the attitude of those folks holding a mortgage - their Confidence actually rose by 4.4 per cent.
"This result highlights an important point that will be significant when assessing the impact of initial rate hikes on sentiment."
Mr Evans noted that in the last long drawn out rate hike cycle confidence was steady until variable mortgage rates hit 7 per cent, from which point it fell by an average of around 9 per cent whenever rates were increased.
"With variable mortgage rates currently 5.8 per cent their extremely low level is providing a basic support to sentiment", he said.
"That is unlikely to change until mortgage rates get up to around 6-6.5 per cent at which point rate changes will start to deter households."