Consumer sentiment weakened slightly in May, despite some expectations it would get a boost from the federal budget's boost on spending.
The Westpac-Melbourne Institute Index of Consumer Sentiment fell to 98.0 points in May, from 99.0 in April, remaining below the 100-point level at which optimists outnumber pessimists.
"The small overall move this month masked some significant developments amongst other Indexes in the survey," Westpac chief economist Bill Evans said.
"Respondents' confidence in housing and the outlook for house prices deteriorated sharply, while the assessment of the budget around the outlook for family finances was decidedly weaker."
The survey was conducted over six days across the date of the budget, with virtually no difference in sentiment measured before and after.
A third the people surveyed indicated family finances would deteriorate, in response to a specific question on the impact of the budget.
Seven per cent expect family finances to improve and half said they would stay the same.
"The disappointment for the government will be that despite its high expectations and its focus on spending (particularly infrastructure; education and health), consumer sentiment remains stuck below the significant 100 level," Mr Evans said.
Westpac believes that some heat may be coming out of the housing market as macro prudential policies and some budget initiatives discourage housing investors, and expects the Reserve Bank of Australia to keep the cash rate on hold at its next meeting in June.
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