The Westpac Melbourne institute index of consumer sentiment fell by 6.8 per cent in May to 99.7, its lowest point since August 2011.
A reading below 100 points indicates there are more pessimists than optimists on the state of the economy.
The survey was conducted between May 12 and 17, the days following the federal budget.
“The sharp fall in the index is clearly indicating an unfavourable response to the recent federal budget,” Westpac chief economist Bill Evans said.
The Westpac survey’s result reflects that of the ANZ-Roy Morgan index, which showed consumer confidence had dropped 14 per cent since April when leaks about government spending cuts and the debt levy started to appear.
The ANZ survey, released on Tuesday, was conducted on the weekend after the May 13 budget.
One of the questions in the Westpac survey asked about the impact the budget had on people’s finances.
Just over 59 per cent of respondents said the budget would make it tougher on family finances in the next 12 months, while just 3.1 per cent said it would improve.
Consumer sentiment traditionally takes a tumble after federal government’s hand down their budgets.
After the 2013 budget, the Westpac survey showed 45.6 per cent of respondents said the budget would worsen family finances.
“The initial response to a budget can sometimes be an overreaction. For example, in 2013 the index bounced back by 4.7 per cent in June,” Evans said.
However, the latest survey’s reading on people’s confidence about the economic outlook for the coming year dropped by 14.2 per cent to its lowest level since August 2011.
It also showed people were feeling less confident about buying a home.
On the positive side, there was a slight rise in the number of respondents who believed now was a good time to buy a household item.
Most of those surveyed also did not expect their job prospects to deteriorate.