Domestic air fares have increased to their highest level in more than a year, with discount fares more than 5 per cent higher in August.

"While discount fares are still lower than a year ago, business and full economy class fares are higher by almost 6 per cent, the strongest lift in prices for over a year." Said CommSec economist Craig James.

Discount airfares rose by 5.6 per cent in August with business class fares 3 per cent higher. Full economy climbed by 1.9 per cent and restricted economy fares went up 0.4 per cent, based on Bureau of Transport and Regional Economics data.

The rise comes as lending figures fell to their lowest in almost five years while consumer confidence improved.

Total personal finance commitments, meanwhile, increased 1.2 per cent, seasonally adjusted, from $6.814 billion in May to $6.896 billion in June, the Australian Bureau of Statistics said.

Total commercial finance slumped 8.9 per cent in June and lease finance fell 6 per cent.

Mr James said people's reluctance to take on debt will potentially translate in continued weak spending figures in coming months.

"It goes to show that just because you are generally happy with your lot, it doesn't mean that you're ready to go on a spending or borrowing spree," he said.

"We need to see a few more months of stable interest rates before consumers are tempted to part with their cash again.

"The global mood of conservatism is pervasive. Debt is out, saving is in."

Consumer confidence improved in August, as reflected in Westpac-Melbourne Institute consumer sentiment index rising 5.4 per cent in August to 119.2 points.

Above 100 points indicates there were more optimists than pessimists.

Mr James described the airlines' move to raise domestic airfares in the hope of recovering some of their thinning margins as "courageous."

"But with both consumers and businesses scouring for the best fares on offer, the key question is whether the higher fares will stick?"