Consumer sentiment in Australia declined for the eighth consecutive month to equal pandemic lows this month, due to the rising cost of living and soaring interest rates.

The Westpac-Melbourne Institute index of consumer sentiment published on Tuesday fell 3.0% this month compared to June, when it declined 4.5%. From July 2021, the index has fallen 23% at 83.8.

Sentiment has plunged around 20% since December, said Westpac chief economist Bill Evans, a figure typically seen during global shocks or recessions.

In addition, an ANZ weekly poll revealed a 2.5% decline in its confidence index as consumers feared inflation may reach 6% in the coming months. Q2 figures due to be published later in July will likely show inflation is already near the 6% mark, Reuters reports.

The gloomy outlook highlighted last week’s decision by the Reserve Bank of Australia (RBA) to hike interest rates by a further 50 basis points to 1.35%, cautioning that more hikes would be required to curb soaring inflation.

ANZ analysts said that mortgage holder confidence has declined 25% since April, whilst renters’ confidence was down 4%.

"The cash rate has increased at a faster pace than we have seen in any cycle since 1994 and this is clearly unsettling for consumers also facing a sharp rise in the cost of living," Evans stated.

The increasing borrowing costs add to pressures stemming from higher petrol prices, food and housing, with Westpac's measure of family finances falling 2.8% compared to last year.

The outlook for finances over the coming year rose 0.1%, yet this followed a 7.6% drop in June, the findings showed. In addition, the economic outlook gauge for the next 12 months fell 4.2%, whilst the five-year outlook edged down 6.7%