Consumer confidence has bounced back and reversed the previous week's fall, but higher electricity and petrol prices are expected to put pressure on Christmas season sales.
The latest ANZ-Roy Morgan Consumer Confidence Index shows a 0.7 per cent rise to 115.8 points in the week to December 3, from a 1.2 per cent fall in the previous week, with all but one of the sub-indices posting gains.
Driving the modest lift was a jump in sentiment around both current and future economic conditions, with the subindices up 1.7 per cent and 0.5 per cent, respectively.
On a four-week moving average, views towards the current economic conditions have reached their highest point since late 2013.
ANZ's head of Australian economics David Plank said confidence had been trending higher for some months.
"I think this reflects the continued improvement in the labour market and, perhaps, might suggest wages are moving higher," Mr Plank said.
"There have been some encouraging media reports about higher wage settlements in the fourth quarter, though we won't know for sure until we get the data in early February."
Despite the general upbeat tone, the index relating to buying a household item weighed on overall confidence, falling 0.7 per cent and completely reversing the previous week's 0.5 per cent rise.
Mr Plank said rising electricity and petrol prices had dragged the index back under the long-term average - which was not a good sign for Christmas season sales.
He said petrol prices would definitely be an issue for retail sales in October, while the weaker housing market would add to sales pressure over the holiday period.
"As for Christmas sales, the weaker housing market is probably a factor in time to buy a major household item being subdued as well as petrol and electricity," Mr Plank told AAP.
"This could dampen enthusiasm for large purchases over this Christmas season."
He expects the flood of data due out this week, including third quarter gross domestic product (GDP) figures due to be released on Wednesday, to set the tone for confidence in the weeks ahead.
