Australians are now seeing a brighter economic outlook, having looked past global market gloom and recent interest rate hikes.
The Westpac-Melbourne Institute Consumer sentiment index registered its biggest monthly leap from above the 100-point level since records started in the mid-1970s.
The index increased 11.1 per cent in July to 113.1 from 101.9 as consumers concentrated on the healthy jobs market and the buoyancy of the economy.
''We were surprised at the vigour of the bounce back,'' said Westpac's chief economist Bill Evans. ''We saw a comparable surge in confidence in 2009 when households realised that Australia had avoided recession but at that time the Index was recovering from a much lower level.''
Economists have feared that European sovereign debt and the prospect of a double-dip recession in the US could retard global recovery, hitting prospects for Australia's export economy.
''Since the last survey the RBA has held rates steady for a second consecutive month and the dispute over the mining tax has been largely settled,'' said Dr Evans. ''Global financial markets have also recovered somewhat.''
According to Dr Evans, households have also been reassured by a healthy labor market, which added 46,000 jobs in June.
Even with the healthy employment market in recent months, other weaker aspects of the economy, such as dull retail sales, have created a mixed picture of the economy's condition. Consumer spending has been slapped by the central bank's six interest rate hikes since October, with three of them occurring this year.
Dr Evans said the about-face in consumer confidence followed steep falls in the index, showing the current period cannot be compared to the months before the world economic crisis or the recession in the early 1990s.