The Westpac-Melbourne Institute measure of sentiment fell by 5.7 per cent in December.

The index reading of 91.1 points was the lowest score since August 2011.

Westpac chief economist Bill Evans said the result was disturbing.

“Respondents are clearly concerned about the outlook for the economy and job security,” he said in a statement.

The survey was taken during the first week of December when official figures showed the Australian economy grew by a sluggish 0.3 per cent in the September quarter.

Mr Evans said consumers were still disillusioned with the federal government’s May budget.

Some 87 per cent of respondents regarded economic conditions as unfavourable, with 96 per cent pessimistic about the labour market.

“These readings are almost certainly an overreaction but do highlight significant risks to spending, particularly over the course of the next few months,” Mr Evans said.

Westpac is expecting the Reserve Bank to cut interest rates in February and March.

National Australia Bank yesterday reversed its forecasts on the RBA, and is now also expecting rate cuts next year.