The Westpac Melbourne Institute Index of Consumer Sentiment is at its lowest level since September 2015, but remains 4.3 per cent above its level of a year ago.
The index fell 3.5 per cent from 100.8 points in December to 97.3 points in January.
Commenting on the movement, Retail Council CEO Anna McPhee said the momentum of rising consumer sentiment experienced in the final months of 2015 have not continued into January, with the likely impact of this fall attributed to slowing of the Chinese economy and recent sharemarket volatility.
“The index is 4.3 per cent higher than a year ago and, despite monthly volatility, is consistent with growth in consumer activity that retail is currently experiencing,” she said.
“Low interest rates, falling unemployment and low fuel prices continue to support rising consumer consumption, but perceptions about family finances shows there continues to be an underlying fragility of household confidence that could have a longer-term negative impact on attitudes towards spending.
“This sentiment reading highlights how critical it is that governments effectively consolidate the budget position, but do so without jeopardising household confidence and broader economic growth.”
