Consumer confidence fell in February amid householder concerns about future increases to interest rates, a survey shows.
The Westpac-Melbourne Institute index of consumer sentiment fell 2.6 per cent to 117.0 points in February, from 120.1 in January.
Westpac chief economist Bill Evans said the fall was a "little surprising" after the central bank's decision to hold rates in February.
The Reserve Bank of Australia (RBA) stunned financial markets by leaving the overnight cash rate unchanged at 3.75 per cent on February 2.
Most market economists expected a quarter of a percentage point rise to 4.0 per cent.
The survey was conducted in the week the RBA held rates steady.
"Households received a very welcome surprise in February when, despite strong media and market speculation to the contrary the Reserve Bank decided not to raise the overnight cash rate," Mr Evans said in a statement.
"However, the level of the index remains very high.
"It is still 2.9 per cent above the December 2009 reading; 3.2 per cent above the reading of six months ago and 15.2 per cent above its long term average."
Mr Evans said households do not expect interest rates to have peaked.
"A special question in the February survey on consumers expectations for mortgage interest rates supports this view," he said.
"An overwhelming 93 per cent of consumers expect rates to rise over the next 12 months with over 60 per cent expecting an increase of more than one per cent.
"This is consistent with the reasonable commentary on the RBA's rate decision, which emphasised that rates were still likely to rise further over the course of the year.
Mr Stevens said the accompanying statement of the central bank's decision was quite explicit about future rate rises.
"This caution on interest rates is probably best reflected by the response of those folks who currently hold a mortgage where their confidence fell by considerably more than those respondents who wholly own their homes or who rent," he said.
Recent developments in the global economy were likely to have unsettled respondents, Mr Evans said.
"These included news that the Chinese authorities unexpectedly moved to slow their economy, the emergence of further sovereign risk concerns in Europe and four consecutive loss weeks on the US share market," he said.
"Not surprisingly these developments affected Australia's financial markets.
"Since the last sentiment survey, the share price index has fallen by around eight per cent and the Australian dollar was down by 6.5 per cent."
The RBA's decision to pause on rates this month has convinced financial markets the central bank will leave rates on hold on March 2, Mr Evans said.
He said the key for future rate rises was the RBA was still forecasting economic growth to return to trend in 2010 and 2011.
Trend growth for the Australian economy is considered around 3.25 per cent.
"That indicates the need to restore the overnight cash rate to around "neutral" which we assess as 4.5 per cent," Mr Evans said.
"Until that objective is achieved we expect that each board meeting will be a close call although the period when rates are increased at consecutive meetings appears to have passed."
Mr Evans said the RBA would have had three months to assess the impact of three rate rises in the December quarter by the next board meeting on March 2.
"Despite current market sentiment a return to stability in global economic conditions over the next three weeks could still see the bank opting for another increase in March," he said.
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