The recent spate of positive economic data was not enough to keep confidence high, with consumer sentiment taking a hit in August.
According to the Westpac/Melbourne Institute Index of Consumer Sentiment, confidence fell 5 per cent throughout August.
Westpac's chief economist Bill Evans said the drop came a s a surprise, with the Index reverting back to its July level.
"While we were mindful of the high starting point for the Index we expected that the news over the month had been sufficiently positive to ensure a modest further increase," Mr Evans said.
"Consider the positive news: the Reserve Bank kept interest rates on hold for a fourth consecutive month; there was a sharp improvement in the labour market with the unemployment rate falling to 5.1 per cent and 53,000 new full time jobs being reported; both the equity market and the Australian dollar rallied strongly in the two weeks leading into the survey; and, finally, we saw a resolution to political uncertainties with a minority government being formed.
Mr Evans said last month's reading must have overstated confidence. As such, the September level of the Index is probably a more reasonable indication of the level of consumer confidence.