Investing.com-- Australian consumer sentiment improved in early August after the Reserve Bank kept interest rates unchanged and as the effects of recent tax breaks became more apparent, although consumers still remained broadly pessimistic.

The Westpac-Melbourne Institute consumer sentiment index rose 2.8% in August, more than expectations for an increase of 0.5% and improving from the 1.1% decline seen in the prior month.

Despite August's improvement, the index still remained within a range seen for the past two years, as sentiment remained constrained by sticky inflation and high interest rates.

Fears of even higher rates were somewhat soothed after the Reserve Bank of Australia kept rates unchanged during its August meeting, stating that it was seeing some signs of easing inflation.

But RBA governor Michele Bullock warned that any persistence in inflation could invite more rate hikes.

Still, Tuesday’s data showed consumers were less concerned about rate hikes. Consumer were also encouraged by tax breaks and fiscal support introduced earlier this year.

Sentiment towards the labor market remained relatively strong, while sentiment towards the housing market slid to a record low.

Sticky inflation and high interest rates battered consumer sentiment over the past two years, especially as Australian economic growth also slowed.

This trend is likely to continue in the near-term, with the RBA offering scant cues on interest rate cuts as inflation showed limited signs of cooling.

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