Australian consumers are breathing a sigh of relief as calm returns to global financial markets.
The ANZ-Roy Morgan consumer confidence index rose 0.6 per cent in the week ending February 21, with most subindexes showing improvement.
ANZ chief economist Warren Hogan said confidence is starting to trend upwards as financial market volatility eases.
A 2.8 per cent jump in confidence levels during the past three weeks partially reverses the 4.5 per cent decline recorded for January.
"With equity markets off their lows, consumers have turned their focus to domestic factors," Mr Hogan said.
The recent pick-up in auction clearance rates and solid conditions in the labour market are gaining attention, he said.
"Looking ahead, developments in the policy debate, in particular around tax, are likely to influence consumer sentiment," Mr Hogan said.
Discussions around tax reform and spending cuts are likely to intensify ahead of the May federal budget.
"In addition, the impetus from the strength in the labour market may dissipate if employment growth slows around the middle of the year as we expect," Mr Hogan said.
This will influence the outlook for interest rates, with the Reserve Bank hoping for consumption growth to return to above trend levels later this year.
The figures show that consumers are more optimistic about their personal finances and the short-term economic outlook, with both rebounding a cumulative 4.2 per cent during the past three weeks.
By contrast, consumers' views towards these factors fell between six to eight per cent in the last four weeks of January.
"Overall though, households' confidence in the economic outlook remains much weaker than their view of their own finances," the survey said.
A big drag was the measure on whether consumers felt now was a good time to buy a major household item, which slumped four per cent last week.
