Sluggish wage growth and concerns about the housing market are sapping consumer confidence leaving spending at risk, ANZ says.
The ANZ-Roy Morgan Consumer Confidence Index fell 2.4 per cent to a level of 111.1 points in the week ending April 2, remaining above the 100 level separating optimism and pessimism.
ANZ head of the Australian economics David Plank said the index was now below the long-term average and at its lowest level since October 2015.
He said one driver was that underemployment, or the number of people wanting to work more hours, had been ticking up recently and keeping wage growth low.
Mr Plank also said concerns about the housing market, which led to the Australian Prudential Regulation Authority (APRA) to rein in investor home loan borrowing, were also weighing on sentiment.
"Consumers have been becoming less confident about the outlook for some months. This may be why retail sales were so weak in February," he said.
"If confidence continues to waver then it seems reasonable to expect additional impacts on consumer spending."
That in turn could weigh on overall economic growth as household consumption accounts for about 60 per cent of gross domestic product.
Survey respondents were less optimistic about their current finances with the measure dipping 2.8 per cent, and they were 2.1 per cent more pessimistic about their future finances.
Consumers were also much more downbeat about the wider economic outlook, with their views about economic conditions over the next 12 months slumping 5.4 per cent and their views about economic conditions over the next five years falling 2.8 per cent.
ANZ said the "now is a good time to buy a major household item" subindex was the only confidence measure to rise in the week, edging up 0.5 per cent.
