Housing prices have increased at "double-digit pace" since the middle of 2013 and retail spending has also been tracking in the right direction, according to AllianceBernstein senior economist Guy Bruten.
"After flat outcomes in the last two quarters, retail sales through October and November are running 2.4 per cent (not annualised) above their third-quarter levels, the fastest pace since the stimulus induced boost in late 2008/early 2009," said Mr Bruten.
Housing construction is also likely to make a "meaningful contribution" to the Australian economic growth, he said.
"All this is taken as evidence that monetary policy is gaining traction and that no further stimulus is required," said Mr Bruten.
But AllianceBernstein is "unconvinced of this narrative" of the recovery, he said – with concerns about its sustainability.
"The housing cycle is somewhat different from “normal” in that it is dominated by multistory apartment developments," he said.
It remains to be seen whether the growth in housing can continue, or whether it is "sowing the seeds for a sharp correction down the track", said Mr Bruten.
"We also place question marks around the prospect for continued solid growth in retail spending. After all, the household income fundamentals remain relatively soft—there’s little sign of a pickup in jobs growth, and wages are under significant downward pressure," he said.
Jobs could also be an impediment to the recovery, with AllianceBernstein's research suggesting the unemployment rate is underestimating the "true slack of the labour market", said Mr Bruten.
"The second issue is that, even if a recovery in housing activity continues, it is unlikely to be enough. The headwinds coming from the adjustment to the end of the mining boom mean that this is far from a normal cycle.
"The bottom line is that we continue to think that the Australian economy will be an underperformer this year, with domestic demand growth barely above one per cent," he said.
