Recent interest rate cuts have boosted consumer sentiment, but pessimism about the state of the economy remains, a private sector survey shows.
The Westpac Melbourne Institute Index of Consumer Sentiment is up 3.7 per cent to 99.1 in July.
However, it remains below the key index level of 100, which indicates the number of pessimists about the economic conditions facing households continue to outweigh optimists.
Westpac chief economist Bill Evans said recent interest rate cuts had provided a boost for consumer sentiment but confidence levels remained below the highs of recent years.
"Finally, we have some evidence that the Reserve Bank's policy of cutting the official cash rate by 125 basis points between November last year and June this year is starting to gain more positive traction with households," Mr Evans said in a statement.
"However, this result is far from convincing and should not be interpreted that we can expect confidence to steadily return to more normal levels over the months ahead."
In its latest move, the Reserve Bank of Australia cut the cash rate by a quarter of a percentage point, or 25 basis points, in June.
They survey suggests consumers are more confident on domestic economic matters with the continuing strength of the Australian dollar and petrol price falls.
Mr Evans said all components of the Index increased in July, with the sub-index tracking consumer expectations over the next 12 months increasing by 5.8 per cent.
The sub-indexes tracking consumer assessments of finances relative to a year ago improved by 4.6 per cent, while the outlook for finances over the next 12 months improved by three per cent.