Consumer confidence has taken a turn for the worse as the euphoria from February's interest rate cut begins to fade, but the Reserve Bank says optimism will return - eventually.
Confidence fell 1.2 per cent in March, following February's massive eight per cent, rate cut-induced bounce, the Westpac/Melbourne Institute consumer sentiment survey on Wednesday showed.
The number of pessimists once again outweighed the optimists but on the plus side, confidence remains on par with levels seen before May last year, when the federal budget delivered a huge blow to sentiment.
Westpac senior economist Matthew Hassan said rising petrol prices and weak economic growth figures last week had sparked the pessimism, while any cheeriness following February's rate cut had started to wear off.
Wednesday's figures followed dismal confidence surveys on Tuesday, with the National Australia Bank business confidence index dropping to its lowest level in two years, while the ANZ/Roy Morgan weekly consumer confidence index was at a three-month low.
Reserve Bank assistant governor Christopher Kent said rising unemployment and slow wage growth were behind the downbeat sentiment.
"Unfortunately, we have an interest rate lever, we don't have a confidence lever," Dr Kent said on Wednesday.
But consumer confidence would build over time, he said, because of the economy's good long-term prospects.
"It tends to build slowly and gradually; it tends to be lost quickly," he said.
Mr Hassan said a softening in sentiment was always likely following February's lift, after the RBA cut the cash rate to a new record low.
While confidence remained fragile, it was improving, he said.
"Interest rate moves often generate a big initial reaction that dissipates over time," he said.
"The overall message seems to be that while consumers remain very concerned about the outlook for the economy and job security, they are less concerned than they were in December and acknowledge the more positive situation around interest rates."
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