The index lifted 1.3 points to 104.3 in the three months ended December.
That brought confidence back to a level last seen a year ago but still well below the survey average since 2004 of 122.
An index above 100 indicates there are more optimists than pessimists.
Otago confidence has remained relatively stable since December 2008, when it was 104.2.
It was 104.9 in December last year and 104.1 in September 2009.
Confidence in Southland rose to 110.9 in December from 109.6 in September and in Canterbury, confidence was 110 in December from 109.2 in September.
Seven of the 11 regions recorded increases in employment confidence in the quarter, the biggest gains being among employees in the Bay of Plenty and Auckland.
In terms of demographics, confidence was up among male employees but fell among females.
By age group, the biggest gains in the quarter were among 30 to 49-year-olds, although confidence is still the highest in the 18-29 age group.
Confidence fell among employees in the 50 and over age group.
Confidence increased the most among lower-income employees, but overall they remained less confident than those on middle or upper incomes.
Westpac senior economist Donna Purdue said what she found most encouraging about the survey results was that confidence had been driven higher by improved perceptions of current employment conditions, rather than just by expectations of what was to come.
In particular, fewer respondents believed jobs were hard to get (net 59.5% in December from net 66.5% in September), while a net 15% of respondents still said they were earning more than a year ago, a figure broadly unchanged from September.
As a result, the current conditions index lifted from a record low of 74.4 in the September 2009 quarter to 77.8 in December, the first increase since September 2007.
"On its own, that suggests that the worst of the job layoffs are behind us.
Still, the overall message is clearly that labour market conditions remain tough - just not as tough as they were back in September."
In contrast to current conditions, employees remained overwhelmingly optimistic about the future, Ms Purdue said.
The employment expectations index was broadly unchanged at 122 through the quarter, close to the record high of 125.1 reached in December 2004.
A net 16.6% of respondents said they expected job opportunities to be plentiful this time next year, up from 14.4% in September and the strongest response to that question in the survey's history.
A net 36.2% said they expected to be earning more, up from a net 34% in September.
Perceived job security fell during the quarter, from a net 18% in September to a net 13.2% in December.
Lower job security might partly explain why consumer spending had been relatively slow to respond to improving consumer confidence and general economic conditions.
Employment growth was also unlikely to keep pace with population growth in the near term.
That meant the unemployment rate was likely to rise until mid-2010.
Westpac expected a peak of 6.7% unemployment in March, up from 6.5% currently.
