Concerns about the federal budget are back and weighing on consumer confidence.

The Westpac Melbourne Institute Index of Consumer Sentiment fell by 4.5 per cent in September to 94 points.

The index has stayed below 100 points for the six months, meaning there are more pessimists about the economy than optimists.

Westpac chief economist Bill Evans said the outcome was a surprise after the recovery in the past three months.

“For September, budget and taxation continues to dominate,” he said.

Mr Evans said the other major issues for consumers were economic conditions, employment and interest rates.

“Households are a little more comfortable with the budget but it continues to dominate their thinking and they remain on edge,” he said.

The proportion of respondents saying that the budget was a significant issue for them in September was the second highest since the Westpac survey was started in the mid 1970s.

The highest reading was in June this year, the month after the government announced tough spending cuts in its budget.

The consumer confidence index is now only 5.8 per cent below its pre-budget levels.

The survey also showed a sharp deterioration in respondents’ assessments of the economic outlook.

“Concerns around the medium-term outlook are likely to make households more cautious,” Mr Evans said.

“Logically, such concerns indicate that households expect any current economic weakness to be sustained for a considerable period.”

Mr Evans said falling consumer confidence is unlikely to change the Reserve Bank’s policy to keep the cash rate unchanged for the foreseeable future.

He still expects the next rate move will be up, but not until August 2015.

“Issues around the recent budget, which are still unnerving households, will have been resolved and we expect that households will be encouraged by their much improved balance sheets to lift spending,” Mr Evans said.