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The Westpac-Melbourne Institute consumer confidence index rose 18% from 79.5 in August to 93.8 in September.
While Westpac chief economist Bill Evans called August's results an "over-reaction", he called September's bounce back a "pleasant surprise".
At 93.8, this is just 1.6% below the six-month average prior to the pandemic locking down the economy in March.
The category with the biggest bounce-back was 'Economic conditions next 12 months', which soared 41% over August's levels.
'Time to buy a dwelling' also rose 3% for an index of 110.5, with CommBank revising its house price fall forecast to 6%.
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Westpac's consumer confidence report coincides with the CEO of the Australian Retailers Association Paul Zahra saying at a National Press Club address that spending is key to economic recovery.
"Everything is interlinked. Confidence and certainty are intrinsically linked to spending. Spending is intrinsically linked to jobs," he said.
Mr Zahra also cited a Reserve Bank report that found household spending accounts for 56% of all national spending.
He said any retail spending trickle has been "underpinned" by support measures such as JobKeeper and increased JobSeeker.
"It is very concerning to imagine what will happen when the effect of these support measures wears off," he said.
"Recent research projected that the scheduled end of the JobSeeker payment after December will take the equivalent of $8.5 billion per year from the retail sector.
"When retail fails, it doesn’t just hit the national bottom line – it knocks our confidence; our consumer confidence and our mental health."
Today was a milestone moment for the retail sector with retail front and center of a live address at the National Press Club by ARA CEO @paulzahra_1 .
— Australian Retailers Association (@retailaustralia) September 9, 2020
We can’t have an economic recovery without a retail recovery: https://t.co/rEpcHD6vPO#NPC #auspol #RaisetheRateforGood pic.twitter.com/QtF8AHl0hX
Mr Zahra in his address also cited research from the Office of Linda Burney MP (Federal, Labor), that revealed social security recipients spend approximately 58% of their payments on retail goods or services.
In Westpac's consumer confidence report, 'Time to buy a major household item' rebounded 16.3% to 105.1, but this is still 12.1% below the index a year ago.
Earlier in the month, AMP found average incomes were better off by $5,000 following federal government stimulus measures, while the household savings rate skyrocketed to nearly 20% - the highest level since 1974.
Source: Tenor
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