Consumers are at their gloomiest in three years, but interest rate cuts may not be enough to cheer them up and get them spending.
The Westpac-Melbourne Institute sentiment index fell by 5.7 per cent in December, with consumers worried about rising unemployment and a slowing economy.
"They're more concerned than they were a few months ago," Westpac chief economist Bill Evans told AAP.
"This is a very disturbing result."
Westpac has joined a growing list of economists and institutions who expect the Reserve Bank to cut interest rates in early 2015.
Mr Evans said while rate cuts would put downward pressure on the Australian dollar and encourage business borrowing, more was needed to revive consumer spending.
"There are lots of other factors behind the weakness in confidence and monetary policy is not the only solution," he said.
The survey was taken during the first week of December, when official figures showed the Australian economy grew by a sluggish 0.3 per cent in the September quarter.
Mr Evans said consumers were still disillusioned with the federal government's May budget.
Some 87 per cent of respondents regarded news on economic conditions as unfavourable, with 96 per cent pessimistic about the labour market.
Consumers were particularly worried about economic conditions in the next 12 months, with people over 45 the most downbeat.
They are also less upbeat about the housing market, with optimism about real estate at its weakest point in four years.
The overall consumer sentiment reading of 91.1 points was the lowest score since August 2011, and marked a 5.7 per cent fall from November's 96.6 points.
The reading has been below the 100 mark, where pessimists outnumber optimists, for 10 consecutive months.
It is also 13.3 per cent weaker than where it was a year ago.
JP Morgan economist Tom Kennedy said a 12 per cent drop in the number of consumers who thought now was a good time to buy a major household item was worrying.
"While the magnitude of the decline may be exaggerated, the caution expressed in today's survey is a worrying sign for retailers in the weeks leading up to Christmas," he said.
Commonwealth Bank economist Gareth Aird said the increase in pessimism could be linked to the recent drop in the Australian dollar, making some worry about the economy's fragility.
Adding to consumers' woes was a steep fall on the share market, weak wages growth, and confusion over the federal government's policy backflips.
"All up, a weak print today and one that indicates consumer confidence remains brittle and caution prevails," he said.
Share
