Consumer sentiment has been boosted by the Reserve Bank's decision to cut the cash rate to a record low 2.5 per cent in August.
The Westpac Melbourne Institute Index of Consumer Sentiment rose by 3.5 per cent in August to a reading of 105.7, almost 10 per cent higher than its value a year ago.
Westpac chief economist Bill Evans said the result was the highest since March, but was still seven per cent below the average in 2010, when households were becoming optimistic that the global financial crisis had passed.
Before the latest interest rate decision was announced, the Index averaged 102.4, but after the announcement, was averaging 107.4, Mr Evans said.
"This indicates that the rate cut is likely to have had a solid positive impact on sentiment," he said.
"It also indicates that the negative response to the government's economic statement which included a further $33 billion deterioration in the fiscal position was muted.
"Further evidence of the positive response to the rate cut can be found in the response of those folks with a mortgage, with their confidence lifting by 7.4 per cent."
Mr Evans said the rate cut led to a bounce in the outlook for people deciding to buy a dwelling and boosted confidence around family finances.
He said Westpac economists expected another rate cut in November.
"As the Australian dollar stabilises, the labour market continues to weaken, inflation pressures remain contained and business confidence and investment remain soft, the case for further stimulus will be strong," he said.
Mr Evans said the survey showed the fall in the Australian dollar was boosting confidence in rural areas, with the more competitive local currency improving the export outlook.
