Destructive bushfires and toxic air has driven consumer confidence down to one of its lowest post-global finanacial crisis levels, prompting speculation the Reserve Bank will have to use its first meeting of the year to cut official interest rates.

The closely watched Westpac-Melbourne Institute measure of consumer sentiment fell by 1.8 per cent in January with growing unease about the impact of the bushfires on the state of the economy now and over the next few years.

Bushfires and toxic air contributed to a further fall in consumer confidence in January. Credit:Joe Armao

Westpac chief economist Bill Evans said the drop could have been worse, given the survey was taken as many parts of the country received fire-easing rainfall.

But he noted the measure has only been below its current level seven times since the the worst of the global financial crisis in May 2009.