Australia's services industry lifted in October for the first time in six months as measures of sales, new orders and wages advanced, a private survey revealed.

The latest Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI) rose 5.1 points to 50.7 in October, with activity expanding for only the second time this year.

Activity improved across most services sub-sectors in the month with health & community services and accommodation, cafes & restaurants expanding most strongly.

Australian Industry Group Chief Executive, Heather Ridout, said: "The pick-up in overall services activity is a welcome development. However, the pace of services growth was modest and a number of sub-sectors contracted over the month. The rebound in sales and the lift in new orders are tentative signs that businesses and households became more willing to open their purse strings in October.

"While the lift in activity during October is a positive sign for the services sector in the lead-up to Christmas, yesterday's decision by the Reserve Bank to raise the cash rate and give monetary policy a contractionary bias will leave many businesses wary that growth in sales and new orders will prove short-lived," Mrs Ridout said.

Commonwealth Bank Senior Economist, John Peters, noted: "The latest Australian PSI readings showing a lift in the headline index back into expansionary territory is heartening, and is consistent with other recent data suggesting that consumers may be starting to shed their GFC "blues" and the desire to engage in unrelenting substantive balance sheet repair.

"The fact that most sub-sectors improved in October, along with the boost to new orders and sales, strongly hints that the consumer restraint so evident for most of 2010 may be starting to wane in light of the exuberant jobs market, solid wages and salaries growth, and generally lifting household wealth on the back of rising share and housing prices in 2009 and 2010," Mr Peters said.

The report measures sales, new orders, deliveries, inventories and employment for companies such as banks, real estate agents, insurers, restaurants, transport firms and retailers to compile the overall performance of services index.

An Australian PSI reading above 50 points indicates that services activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Results are based on a sample of around 200 companies.