Consumers are worried about their own finances and most expect mortgage interest rates and unemployment to rise this year, Westpac says.
The Westpac-Melbourne Institute Index of Consumer Sentiment jumped 2.3 per cent to 99.6 points in February, from 97.4 points in January, remaining just below the 100 point level at which optimists outnumber pessimists.
Westpac senior economist Matthew Hassan said all components of the index had improved this month, but it was still below the highs recorded in October and November.
"At just below 100, the index is in slightly pessimistic territory with consumers reporting family finances under pressure and a mixed outlook for the economy," he said.
Consumers' views of their current finances compared to a year ago had improved, up four per cent, and they were also 1.1 per cent more upbeat in their views about their finances over the next 12 months. But both measures remain below average.
Respondents were 2.8 per cent more optimistic about the economic conditions over the next 12 months and 1.6 per cent more optimistic about the outlook over the next five years.
The unemployment subindex also rose 3.1 per cent, with the higher reading meaning more consumers expect unemployment to rise in the year ahead.
Sixty per cent of households expect mortgage rates to rise this year, while 35 per cent expect they will be steady and just five per cent expect further cuts.
Mr Hassan said concerns about potential rate rises may have hit sentiment towards housing, with the time to buy a dwelling index slumping 7.8 per cent in January.
"The index is now at its lowest level since May 2010 when the Reserve Bank of Australia was near the end of its last tightening cycle," Mr Hassan said.
"Victoria, Queensland and WA all recorded 10 per cent plus declines in the month, although the NSW Index remains the weakest across the states. The fall points to a shaky start to the new year for housing markets."
