Activity in the services sector has expanded into the black for the first time in 19 months, as more Australians consume retail goods and recreational services.
The Australian Industry Group/Commonwealth Bank Performance of Services Index (PSI) rose by a seasonally adjusted 5.5 points to 54.8 in October.
It was the first time the PSI has been above the 50 point level that separates expansion from contraction since March 2008.
"The move into positive territory in the services sector reflects improved demand for services driven by a marked lift in consumer confidence," Australian Industry Group (Ai Group) Chief Executive Heather Ridout said in a statement on Wednesday.
"Housing-related sectors such as finance & insurance, and property & business services, are also experiencing a period of growth," Mrs Ridout said.
Seven out of nine of the PSI's sub-sectors grew compared to five in September and four in August.
Sales grew to 58.7 points in the month, up from 48.6 in September, while New Orders moved solidly into positive territory at 58.5 points, up from 50.7.
Employment fell for the 17th consecutive month, reflecting past weakness in activity, with the sub-index falling by 1.3 points to 48.6.
Inventories also grew, up 8.4 points to 52.2, while input prices dropped 1.3 points to 50.2.
Commonwealth Bank Senior Economist John Peters said the overall result was positive and highlighted the success of fiscal and monetary policy.
"The improvement in underlying services sector conditions in October dovetails with other economic data suggesting that the economy is gradually picking up momentum after sidestepping a recession in 2009," Mr Peters said.
"We are particularly heartened by the movement of leading indicators such as new orders, inventories and supplier deliveries which have trended higher into expansionary territory.
"These affirm the effectiveness of the prompt stimulatory policy measures taken by the RBA and the Federal Government."
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