If the Reserve Bank had hoped to fire up the economic engine room of consumer spending with a rate cut last month, it will be sorely disappointed by the initial reaction.

Key points: Consumer sentiment fell into pessimism after the RBA cut, reflecting worries about the economy

Consumer sentiment fell into pessimism after the RBA cut, reflecting worries about the economy Optimism rose among property investors, while renters became more pessimistic in June

Optimism rose among property investors, while renters became more pessimistic in June The survey points to consumers preferring to save than spend in the current climate

The 0.25-percentage-point cut sent consumer sentiment tumbling from net optimism to pessimism, according to the latest Westpac-Melbourne Institute survey.

"Responses over the survey week show a marked drop-off after the Reserve Bank's official rate cut," Westpac's Matthew Hassan said.

With 100 index points representing the breakeven point between optimism and pessimism, responses collected before the June 4 decision had a combined index read of 106.8.

"Those collected after had a combined read of 95.5, with daily results showing a further softening after the weak GDP report," Mr Hassan said.

"This is a disappointing result given the cut in official interest rates this month and suggests deepening concerns about the economy have outweighed the initial boost from lower rates."

The March quarter national accounts showed GDP growth had slowed to just 1.8 per cent over the year, the weakest result in the decade since the GFC.

Mr Hassan said the interpretation was supported by studying the various sub-components of the index.

The biggest decline in the index was the expectations of the economy in the next 12 months, while personal finances in the next 12 months jumped.

Mortgage belt marginally happier

The survey also showed unsurprisingly polarised views following the Coalition's return to government on May 18.

Coalition voters reported a strong rise in sentiment (+7.5 per cent), while ALP voters fell into a deep funk (-9.9 per cent).

Understandably, the change in outlook for tax policy lifted the spirits and sentiment among consumers with an investment property (+9.5 per cent), while sentiment among renters fell (-5.3 per cent).

Optimism picked up among households still servicing a home loan in the wake of the rate cut, but only just.

"Sentiment amongst the mortgage belt showed a 2.8 per cent rise, the gain reflecting the cut in interest rates but a more muted response than in previous cuts — sentiment in this segment surged 7 per cent and 15 per cent following the previous cuts in 2016," Mr Hassan noted.

"Where policy changes have generated by far the biggest shift is around expectations for house prices."

The House Price Expectations Index posted an almost 23 per cent gain in June, moving from deep negative territory to a clear positive read of 109.7.

It is the highest level since August 2018 but still well below the long run average read of 126. All states recorded sharp rises and net positive reads over the 100 mark.

Unemployment a worry

In keeping with a number of other indicators and the news cycle, there was a marked step down in confidence about jobs.

The Unemployment Expectations Index rose 5.1 per cent, where an increase reflects increasing worries about job loss, reversing a more positive spirit in May.

Consumers are also showing a high degree of risk aversion about where to park their money.

Adding to bank deposits, superannuation or paying down debt were named as the best place for savings for around two-thirds of those surveyed, while the proportion favouring real estate nudged up slightly from 10 per cent and was still near historical lows.

A few more consumers also pondered the merits of loading up their share portfolios.

"Despite the slight shift, the mix still points to risk that households increase savings rates further in the months ahead," Mr Hassan said.

Given that domestic consumption accounts for almost 60 per cent of the economy, the Reserve Bank would be hoping the dominant instinct among consumers at the moment would be more about spending than saving.

Consumer sentiment by category

Index Average June 2019 Percentage change 1 month Percentage change 1 year Consumer sentiment 101.5 100.7 -0.6pc -1.4pc Family finance vs 1 year ago 89.4 83.2 -2.4pc -4.1pc Economic conditions vs next 12 months 91.0 99.3 -4.7pc -2.2pc Time to buy a dwelling 119.6 116.9 +1.8pc +10.6pc House price expectations 126.4 109.7 +22.7pc -8.6

Source: Westpac-Melbourne Institute