The Index of Consumer Sentiment has failed to get any traction falling by 2.5 per cent in August from 99.1 in July to 96.6 in August, according to the Westpac-Melbourne Institute.

Westpac chief economist Bill Evans has described this as a disappoint result.

“There has been enough positive news around since the last survey, and generally over the last few months, to have sustained an upswing in Consumer Sentiment. News that retail spending was boosted in the first half of the year; unemployment remains low; the Government has released $1.9 billion in fiscal compensation over the May–June period; the Reserve Bank had cut the overnight cash rate by 0.75 per cent in May/June; and the President of the European Central Bank has been promising to "do whatever it takes" to save the Euro has been unsuccessful in sustaining an upswing in sentiment.

“Indicative of a more positive global outlook the share market has risen by 2.9 per cent and the Australian dollar has risen from around USD 1.02 to USD 1.05 since the survey in July, the latter also reflecting Australia’s attractive interest rate differential.”

Evans also said the Index seems to be settling in a “cautiously pessimistic range”. This is the sixth consecutive month that the Index has registered below 100, averaging 96.2.

“This is unusual. The only comparable periods since the recession of the early 1990s are in 2000–01 when the Index printed an average of 96.5 over an eight month period and in 2008–09 when it averaged 88.0 over a 16 month period,” Evans said.

“That most recent period coincided with the authorities responding with a very aggressive fiscal expansion. In the current period both Federal and state governments are entering into substantial fiscal consolidations.”

As for predictions of whether we’ll see another rate it, it’s unlikely so. However, Evans notes if there is likelihood for any further cuts it will be clear by the December quarter.

“Today's report provides some gentle support for the prospect that lower interest rates may be needed later in the year,” Evans concluded.