By Poppy Johnston in Canberra

Households are growing increasingly optimistic about the outlook for the economy and future of their finances, boding well for the hurting hospitality sector.

Consumers pinching their pennies in response to cost-of-living pressures have taken a toll on the food and drink services.

The sector has recorded the highest failure rate of all businesses tracked in CreditorWatch’s industry risk index and those rates continue to grow.

They hit 8.5 per cent in October on a rolling 12-month basis, up from 8.3 per cent in the 12 months to September.

While the return of tax office debt collections after they were paused during the pandemic was behind much of the uptick, higher electricity, insurance, rental costs and wages have also been a source of business stress.

“Together with some greater caution in discretionary spending and softness in interest rate sensitive sectors of the economy, this unsurprisingly has led to higher voluntary business closures and some rise in insolvencies,” chief economist at the credit reporting bureau, Ivan Colhoun, said.

He said cautious spending was hitting hospitality businesses particularly hard but income tax cuts and ongoing low unemployment should start to support activity going forward.

Business and consumer confidence surveys have already been showing signs of life after prolonged weakness.

ANZ and Roy Morgan’s weekly consumer sentiment survey picked up modestly last week and has been trending well above the lows felt last year, led by improving confidence in the economic outlook and personal finances.

Treasurer Jim Chalmers remains optimistic about the direction of the economy.

Set to preview refreshed Treasury forecasts in a statement to parliament, Dr Chalmers will also take stock of the domestic economy.

“The progress we’ve made since July 2022 is clear,” he will say, based on extracts from his speech.

“Inflation has more than halved. Real wages are growing again.

“Even with very substantial progress in the aggregate numbers, we know that doesn’t always translate to how people are faring and feeling day-to-day.”