The Westpac-Melbourne Institute Consumer Sentiment index fell by 4.1 per cent to 96.5 in July from 110.7 in June.
The main driver, Westpac senior economist Matthew Hassan noted, is deteriorating expectations for the Australian economy and prospects for family finances.
The index components show the largest decline in the sub-index tracking “economy, next 12 months”, which slumped by 12.3 per cent to be down 16.4 per cent since May to its lowest level in four years.
Longer-term expectations for the economy were also reported to fall sharply, with the “economy, next five years” index slipping by 6.7 per cent.
The sub-index tracking expectations for “finances, next 12 months” recorded an 8 per cent drop, slipping into net pessimism for the first time since 2017.
The Reserve Bank’s rate cut on 2 July had little or no impact on sentiment, the analysis noted.
The bulk of Westpac’s survey was completed prior to the tax package passing into legislation; however, it had already been foreshadowed by the media.
“The muted sentiment response to both interest rate cuts and tax relief may stem from the fact that both developments were widely anticipated,” Mr Hassan said.
“Notably, the sub-group detail showed no boost to sentiment amongst groups that stand to benefit most from policy easing: sentiment amongst mortgage holders declined [by] 3.3 per cent in the month and sentiment amongst middle-income earners was down [by] 5.5 per cent.”