The Westpac-Melbourne Institute confidence index soared 28 per cent in three months to August, a far bigger jump than the 23 per cent recorded as Australia climbed out of the early 1980s recession and the 20 per cent recorded as Australia climbed from the 1980s recession.
Significantly, optimists now outnumber or equal pessimists in every age group, every income range, every occupation type, and for the first time in almost 2 years every political persuasion.
"I am amazed," said the Melbourne Institute's Professor Guay Lim, who compiled the survey. "We asked the questions this weekend after a week of very good news on employment and the Reserve Bank's positive assessment of the economy. People seem to have come around to the view that the worst won't happen to them."
Coalition voters have been consistently negative in their views about the economy since just after the election of the Rudd Labor government in November 2007...
This month they jumped well into positive territory for the first time since early 2008 with optimists outweighing pessimists by a margin of 12 per cent.
Labor voters have been in positive territory for 3 months with optimists outweighing pessimists by 20 per cent.
Treasurer Wayne Swan described the turnaround in confidence as "staggering" and raised the prospect of it becoming self-fulfilling.
"Ultimately it is the confidence of Australian consumers and businesses that will provide the spark for the sustained economic recovery," he told parliament, adding that retail spending was up 5 per cent on November and the construction of new homes up 55 per cent on October.
The detail of the figures suggests that the retail boom will continue even after the government's stimulus payments have been spent with the Australians who agreed with the proposition that "now is a good time to buy a major household item" outnumbering those who did not by an exraordinary 2 to 1.
There were also big increases in the proportions of Australians agreeing that "now is a good time to buy a dwelling" and that "now is a good time to buy a car", with both well above long-run averages.
"This will encourage the Reserve Bank to begin the process of normalising interest rates, probably from early 2010," said Westpac economist Matthew Hassan. "It is clear that as far as consumers are concerned, the worst appears to have passed."
Absent from the Treasurer's language yesterday was the usual reference to Australia not being "out of the woods".
Instead Mr Swan spoke of "good news and bad news before this crisis is behind us," suggesting that the government's own views may be becoming more optimistic.
The Australian stock market edged 0.3 per cent higher Wednesday, closing at its highest point since October 2008.
Published in today's Age
