The Westpac-Melbourne Institute October consumer sentiment survey is at its highest level since July 2018, at 105.0.
This means that consumers are generally 'confident' about the economic outlook, as anything above 100 is considered positive.
The index is up 10% on average levels seen six months before the pandemic hit Australia, and surged 11.9% on the month, up from 93.8 in September, and a low of 75.6 in April.
Westpac chief economist Bill Evans has labeled this resurgence as an "extraordinary result".
"Such a development must be attributable to the response to the October Federal Budget; ongoing success across the nation in containing the COVID-19 outbreak; and the expectation that the Reserve Bank Board is likely to further cut interest rates at its next meeting on November 3," he said.
The sub-index 'house price expectations' surged 31.5% on the month, but remains down 15% on the year, while 'unemployment expectations' declined 14.2% on the month.
'Economy next 12 months' also increased 24%.
A post-Budget surge
Reactions to the Budget were also positive.
Since 2010, the survey has featured a post-Budget question, and in that ten-year period, the expectation that the Budget would 'improve their finances' is -29%.
This year, for the first time, the net positive reaction to the Budget was +9.5%.
However, Mr Evans said reaction was more positive among males than females, after the Budget was criticised for not offering enough to the fairer sex.
"Within the overall result there is a positive balance of 21.9% from males compared to a slight negative of –3.7% for females," Mr Evans said.
"Respondents in the 35 to 49 age group returned an average positive read of 19%; while those with annual incomes over $100,000 showed a positive balance of 25.7%."
Sentiment on job security also saw a lift, with those aged over 45 seeing a 20% lift in confidence, despite JobMaker targeting younger people.
Mr Evans labelled this surge as "most surprising and reassuring".
Will the RBA cut the cash rate in November?
Despite the surge in consumer sentiment, this might not be enough to sway any Reserve Bank decision on a 'Melbourne Cup rate change'.
Mr Evans says Westpac expects a cash rate cut from 0.25% to 0.10%, highlighting Reserve Bank targets of 'full employment' and desired inflation levels are still lagging.
"In our view, communication from the Bank over the last few weeks points to this outcome," he said.
"Recently, we have detected a change in attitude indicating more confidence that the plumbing of the financial system can operate effectively at an even lower set of policy rates.
"With that in mind and the commitment towards full employment and the target for inflation there seems to be no reason for the Board to delay its decision."
Already the overnight cash rate sits at around 0.13%, thanks to the Reserve Bank purchasing Government bonds - a further cash rate reduction could see the overnight rate slip into negative territory.
In late September, Reserve Bank deputy governor Guy Debelle did not rule out negative rates, among other "interventions".
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