Dec. 21 (Bloomberg) -- New Zealand consumer confidence rose to a 10-year high in the fourth quarter as higher house prices and an 18-year low jobless rate buoyed household incomes.

Westpac Banking Corp./McDermott Miller's consumer confidence index rose 5.2 points to 130.2 for the three months ending Dec. 31, according to a report published today in Wellington. That's the highest since June 1994. A reading above 100 indicates most people are optimistic about the economy.

The jobless rate fell to 3.8 percent in the third quarter, boosting wages and encouraging consumers to borrow and spend. Central bank Governor Alan Bollard this month said there are few immediate indicators of an imminent slowdown in consumer spending, and said he may raise interest rates next year to slow the economy.

``It is not surprising consumers' smiles are so wide,'' said Brendan O'Donovan, chief economist at Westpac in Wellington. ``There has been plenty to keep consumers in a buoyant mood.''

House prices in November rose 11 percent from a year earlier to a record, according to a Real Estate Institute report last week. The New Zealand dollar's 11 percent gain against the U.S. currency the past year has made appliances, computers and other imports more affordable, O'Donovan said.

The proportion of consumers saying it is a good time to buy a car, household appliance or some other big-ticket item rose to the highest since the first quarter of this year. That may fuel consumer spending, which makes up 60 percent of the economy.

Appliance Retailing

Smiths City Group Ltd., an appliance retailer, yesterday said sales in the six months ended Oct. 31 increased 2.6 percent from a year earlier. Managing Director Rick Hellings said falling prices has stimulated demand.

``We have been selling significantly more units to achieve the same dollar value of sales,'' he said in a statement. ``November trading conditions were reasonably soft but December has started strongly.''

More consumers said they are better off than a year earlier, and more expect to be better off in a year, according to the confidence report.

About a third of consumers said they expect the economy to be better in the year ahead -- the second highest reading in the index's 16-year history.

``This is very impressive, given that we are coming off a year of near 5 percent growth,'' said O'Donovan. Economists expect the economy expanded 4.6 percent in the third quarter from a year earlier, according to a Bloomberg News survey.

The survey of 1,559 consumers was conducted from Dec. 1 to Dec. 12. The margin of error of the survey is 2.5 percent.

Economic Growth

Westpac's future conditions index rose more than the present conditions index, suggesting the economy will maintain its momentum. Confidence about future conditions is the highest since March 1996.

``Consumers clearly think that the `stronger-for-longer' economic story has another chapter to be written,'' said O'Donovan.

The Reserve Bank of New Zealand this month forecast economic growth will slow to 3.5 percent by the first quarter of 2005. That's faster than the 2.5 percent pace it forecast in September.

To contact the reporter on this story: Tracy Withers in Wellington, New Zealand at twithers@bloomberg.net.

Last Updated: December 20, 2004 15:25 EST