The Reserve Bank should slash interest rates to a fresh record low next month, Westpac's top economist says, as new figures show consumers remain pessimistic.
Bill Evans says delaying a rate cut until March, as markets are predicting, would be "awkward" for the RBA.
He argues a February cut, following what are expected to be weak December quarter inflation figures, is the better option.
The RBA is due to release its next major economic report card - the quarterly Statement on Monetary Policy - just three days after its February 3 board meeting, giving the central bank a good opportunity to explain its decision and update its inflation forecasts, Mr Evans said.
"The prospect of moving in February should be attractive to the bank," Mr Evans said on Wednesday.
"Delaying the move to March, which seems to be favoured by markets, makes the Statement much more awkward, particularly if, as we expect, the bank's inflation forecasts will be lowered significantly."
Westpac expects the RBA to cut rates twice this year, in February and March, to a new record low of two per cent.
Mr Evans' comments came as new figures showed cheap petrol prices and falling unemployment had failed to stoke consumer confidence.
Confidence increased 2.4 per cent in January to 93.2 points, according to the Westpac/Melbourne Institute index of consumer sentiment.
A number below 100 suggests there are more pessimists than optimists.
The uptick was likely driven by news that Australia's unemployment rate fell to 6.1 per cent in December, while petrol prices fell to a six-year low, Mr Evans said.
A hiatus in media coverage of the federal government's budget issues would have also helped, he said, as reports of Australia's growing budget deficit in December were overshadowed by news of the Sydney cafe siege.
JP Morgan chief economist Stephen Walters said budget issues and terrorism concerns were likely weighing on consumers.
Cheaper petrol means motorists might be more likely to buy ice creams or magazines at service stations, but whether consumers spend more broadly has more to do with labour market conditions, he said.
Commonwealth Bank economist Diana Mousina said the figures were disappointing given petrol prices had fallen 20 per cent since August, potentially leaving an extra $720 in consumer pockets for the year.
The lower Australian dollar, which bumps up prices of overseas goods and international travel, could also be taken as a negative by consumers, she said.
But CommSec chief economist Craig James said weak consumer confidence figures were at odds with data showing 2014 was a strong year for retail sales, new car sales, new home building and house price growth.
"Overall, spending and housing activity are solid despite variable confidence levels," he said.
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