According to both Westpac and ANZ, consumer sentiment decreased last week after RBA messaging surrounding the cash rate decision.
The ANZ/Roy Morgan Consumer Confidence Index dropped 1.2 points last week, based on interviews with 1,509 Australians over the week to February 11.
The Westpac/Melbourne Institute Consumer Sentiment Index rose 6.2% to 86 over the past month, but there was a "sharp pull-back" in the days following the RBA decision.
Prior to the decision, the index was at 94.1, but drops to 80 only including those surveyed afterwards.
Senior Westpac Economist Matthew Hassan said this 15% swing was on par with some of the biggest pre-to-post RBA deteriorations after some of last years rate hikes.
"The pull-back in sentiment suggests many consumers were hoping for a more positive tone, perhaps a clearer indication that inflation was coming back under control and that interest rates may, in time, move lower," Mr Hassan said.
"Instead, the RBA Governor's decision statement and subsequent commentary described the inflation situation as still evolving and was explicit in not ruling out the possibility of further interest rate increases."
It was all but a formality rates would be kept at 4.35% given headline inflation moderating in Q4, but RBA Governor Michele Bullock said concerns remain about the outlook.
"Services price inflation...remains high," Ms Bullock said in the RBA media release.
"This is consistent with continuing excess demand in the economy and strong domestic cost pressures."
In a subsequent appearance in federal parliament on Friday, she stressed while forecasts suggest inflation will continue to moderate, there is "substantial uncertainty" about the outlook.
International developments like an escalation of the conflict in the Middle East could mean price shocks on our shores, and Ms Bullock said there are also scenarios where domestic developments keep inflation high.
"Households [might] save less or draw down on their savings to support spending to a greater degree than assumed in our central forecasts," she said.
"The pressure on labour or non labour costs could also be more than we expect, for instance from poor productivity outcomes or unexpected supply shocks."
The shaded blue areas on the below graph are the range for the predictions, with a spread of nearly 3% between the highest and lowest estimates.
A way to go on inflation?
Over the year to the December '23 quarter, prices rose 4.1%, the lowest annual increase for two years.
The RBA have a target of between 2-3% annual inflation, but the new Statement on the Conduct of Monetary Policy makes it more explicit that the target is the midpoint of that range (2.5%).
This could mean inflation is above target until 2026, which might suggest interest rates will need to be kept higher for longer.
The 'Inflation Expectations' Index from ANZ/Roy Morgan suggests Australians still expect prices to go up by an average of 5% a year moving forward, which is another source of concern for Ms Bullock and the RBA.
"The longer inflation stays away from target, the greater the risk that inflation expectations drift higher," she explained.
"History shows that if inflation expectations were to drift higher, it would require more monetary policy tightening and a costly period of higher unemployment."
However, Mr Hassan says there are still plenty of positives the RBA will take from these consumer sentiment reads.
"The detail shows tentative signs cost of living headwinds may be starting to ease," he said.
"It also suggests that sentiment could bounce back quite strongly if an expected pivot to rate cuts is 'franked' by RBA messaging."
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