A senior central banker has suggested interest rates could be cut again as consumer sentiment continues to wither.
Rates are already at a record low but a Reserve Bank of Australia (RBA) assistant governor Christopher Kent has suggested there is room for more monetary policy easing when the board meets again.
"That's the case they're going to be considering at forthcoming meetings," he told an RSL clubs conference.
Dr Kent delivered his remarks in Hobart an hour before Westpac and the Melbourne Institute announced consumer confidence had fallen to a two-month low.
Sentiment levels in March slid by 1.2 per cent, to a level below the 100 mark where pessimists outnumber optimists, as the euphoria from the February rate cut wore off.
Dr Kent said rising unemployment was behind a lot of the decline in consumer feeling, a day before the Australian Bureau of Statistics releases its February unemployment figures.
"Unfortunately, we have an interest rate lever, we don't have a confidence lever," he said.
"Part of it may be the gradual rise in the unemployment rate; part of it, I suspect, may just be the low growth of labour incomes."
Dr Kent predicted that over time consumer confidence would build, from its below-average levels, because the Australian economy had good, longer-term prospects.
"It tends to build slowly and gradually; it tends to be lost quickly," he said.
On Tuesday, a National Australia Bank barometer showed business confidence at the lowest point since July 2013 while a weekly ANZ-Roy Morgan index showed consumer confidence at pre-Christmas levels.
The RBA left rates on hold in March but governor Glenn Stevens said further easing "may be appropriate over the period ahead, in order to foster sustainable growth in demand".
In February, it cut rates to a record low of 2.25 per cent, after the unemployment rate in January rose to a 12-year high of 6.4 per cent.
"We do what we can by having interest rates low and doing so in a carefully considered way," Dr Kent said.
Meanwhile, the Australian dollar had a brief dip as Dr Kent said the currency was too high, even though it has fallen close to 76 US cents for the first time in six years.
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