Consumer confidence got a boost from last month's change of prime minister but economists feel the rise should have been larger because of improving jobs prospects.
The Westpac/Melbourne Institute index showed consumer sentiment rose by 4.2 per cent in October to 97.8 points, staying below 100 points, indicating there are still more pessimists about the economy than optimists.
Westpac chief economist Bill Evans said the result was a little short of what he was expecting given the government's strong boost in the polls following the leadership change.
"Given that politics is probably the most significant factor in the result it is noteworthy that the index is 11.6 per cent below the level it reached following the election of the Abbott government in September 2013," he said.
Mr Evans said that other factors may have contributed to the boost in confidence including recoveries in the Australian dollar and the local sharemarket, complemented by a steady improvement in the labour market.
"There has been a very significant and unexpected boost to respondents' assessment of the state of the labour market which looks to be an even more significant result than the increase in the overall index," he said.
The Westpac Melbourne/Institute Index of unemployment expectations fell by 16.3 per cent in October to its lowest level in almost a year.
JP Morgan economist Tom Kennedy said the unemployment index is tracking at levels not seen since the unemployment rate was hovering about five per cent three to four years ago.
"Consumers are growing increasingly optimistic on the labour market," he said.
"The fall in consumer unemployment expectations is consistent with yesterday's NAB employment index, which also rose to multi-year highs, and other leading labour market indicators like ANZ job advertisements."
The improvement in labour market conditions was flagged by the Reserve Bank in August, when it revised its forecast for the unemployment to peak below its previous forecast of 6.5 per cent.
However weighing on consumer confidence were concerns about the outlook for housing prices, with that index falling 3.9 per cent in October, down 25 per cent from its peak in December 2013.
