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Consumer confidence tumbled to a two-year low during the first week of July, a survey of households suggests, amid a bleak outlook for the Australian economy.

The Westpac-Melbourne Institute consumer sentiment index released on Wednesday fell 4.1 per cent to 96.5 in July, dipping below the 100-point mark that separates optimism from pessimism.

“The fall in sentiment this month is troubling as it comes against what should have been a supportive backdrop for confidence,” Westpac economist Matthew Hassan said.

It was the second drop in a row for the monthly measure of consumer sentiment following a dip of 0.6 per cent to 100.7 in June.

The survey of 1,200 adults – conducted via phone interviews between July 1 and July 5 – picked up some responses to the Reserve Bank of Australia’s second consecutive monthly cut to the cash rate on July 2 and federal parliament’s approval of tax cuts on July 4.

“Despite these positives, Australian consumer confidence has fallen to a two-year low,” Mr Hassan said.

“The main driver continues to be deepening concerns about the outlook for the Australian economy and prospects for family finances.”