Australian consumer sentiment worsened in early September, reflecting rising concerns about the economy and job security.

The Westpac-Melbourne Institute index of consumer sentiment decreased by 0.5% to 84.6, indicating that pessimists significantly outnumber optimists.

The 'economic outlook for the next 12 months' subindex fell by 2.6% to 81.2, while the 'economic outlook for the next five years' decreased by 1% to 90.6.

Concerns about potential job losses have intensified, with the Unemployment Expectations Index rising 3.7% to 138.4, indicating more consumers anticipate job losses in the coming year.

This increase in unemployment expectations is particularly pronounced among employed consumers, rising 8.3% to its highest level since 2016.

Retail has emerged as the weakest sector in terms of business confidence, reflecting a shift in consumer demand away from discretionary spending.

Westpac senior economist Matthew Hassan noted that while family finances have seen slight improvements, they are overshadowed by a lack of confidence in the overall economy.

Income tax cuts implemented in July provided some relief to household budgets, contributing to a 1.2% increase in the measure of family finances compared to a year ago.

Despite these improvements, the overall sentiment remains deeply pessimistic, as consumers worry about the economic outlook.

Recent data indicated sluggish economic growth, with the Australian economy growing just 0.2% in the June quarter and inflation remaining persistently high.

GDP per capita has declined for the sixth consecutive quarter, dropping another 0.4%, highlighting ongoing economic challenges.

Although fears of further interest rate hikes have lessened, consumers remain increasingly worried about the economic outlook and job security.