Scott Morrison says confidence is returning and Australia is well on its way to recovery, but concedes life is still tough for many people.

Business and Australians appear to be finishing a difficult year in a buoyant mood, a clear sign that the economic recovery from recession is in full swing.

“We are seeing confidence return,” the prime minister told reporters in Canberra on Tuesday.

“(But) it is still tough for many Australians … and we need to ensure that we have the right settings in place.”

Mr Morrison was announcing a further three-month extension to the JobSeeker dole payment supplement, albeit at a lower rate.

It will be reduced to $150 per fortnight and extended until March 28, from the $250 rate that is due to expire on December 31.

The announcement came as business confidence surged to its highest level since mid-2019, while consumer sentiment rose for a 10th straight week.

The National Australia Bank monthly business survey showed confidence jumping nine points in October to five index points.

The rise was led by a large gain in Victoria, driven by a fall in COVID-19 case numbers and, at that time, the looming end of the lockdown in Melbourne.

However, business conditions in the month showed only a marginal improvement, with employment lagging the recovery in activity.

The conditions index rose just one point to an index of one point as its employment index also gained one point to minus five index points.

NAB chief economist Alan Oster said this suggested there had been “ongoing job shedding”.

“Conditions have improved everywhere since troughing in April. However, some industries have seen stronger gains,” Mr Oster said.

“Retail has been a strong performer, despite the deterioration in the labour market, likely reflecting the strong income support from the government.”

Retailers could be in for a buoyant Christmas, with confidence among Australians going from strength to strength.

The ANZ-Roy Morgan consumer confidence index surged 3.2 per cent to 100.2 points in the past week, marking the 10th consecutive increase.

It topped the 100-point mark for the first time since the COVID-19 pandemic began, which indicates optimists have the upper hand..

A 10 per cent rise in the “time to buy a major household item” sub-index was a key factor in lifting confidence to an eight-month high – a pointer to future household spending.

ANZ head of Australian economics David Plank said this could signal a buoyant Christmas shopping period.

“Lower interest rates and the RBA’s commitment to support employment could have been triggers for the gain,” Mr Plank said.

The Reserve Bank of Australia cut the cash rate to a record-low 0.1 per cent last week, while also reducing rates on a number of other policy levers.

Personal income tax cuts, a falling number of coronavirus cases and the easing of restrictions have helped to lift confidence in recent weeks.