The Westpac-Melbourne Institute consumer sentiment index found a significant drop in confidence this year, as interest rates were slashed to record lows.

"This result will be of some concern to the monetary authorities. Typically, an interest rate cut boosts confidence particularly around consumers' expectations for and assessments of their own finances," Westpac chief economist Bill Evans said on Wednesday.

"Consumers are looking behind the reason for the rate cut and, arguably, the absolute level of rates and getting nervous."

The index dropped from 98.2 in September to 92.8 in October, the lowest level since July 2015.

The 2015 plunge was sparked when a sudden 30 per cent plunge in the Chinese stock market concerned Australians, before it rebounded the following month.

While the biggest falls in October were around consumer views on the economy, family finances remained the clear weak spot.

"Spending on discretionary and big ticket durable items has been particularly weak over the last year," Mr Evans said.

NAB senior economist Gareth Spence said the recent personal income tax cuts appear to have failed to boost household spending, as retail sales growth remains soft.

"We think the recent rate cuts will have an impact, but the effects will take longer and be more variable, which will make them less apparent," Mr Spence said.

Commonwealth Bank senior economist Belinda Allan said the consecutive rate cuts were sending negative signals to consumers

"We have been saying for a long time now that extra fiscal support in the way of further personal income tax cuts and more infrastructure spending would be more beneficial than taking the cash rate lower," she said.

Treasurer Josh Frydenberg has attacked the big four banks for not passing on full interest rate cuts, which he says they have no reason to hold on to.

But Labor's shadow treasurer Jim Chalmers says Australians are concerned the government has no answers for the stagnating economy.

Research from RateCity shows the gap between the official interest rates and the big four banks' rates since 2011 has grown from three per cent to four per cent.

The Reserve Bank has cut rates to a record low of 0.75 per cent in a bid to drive unemployment further down and push wages up.

But the RBA has also flagged the possibility of more cuts if the economy doesn't get stimulated, and Westpac expects rates will drop to 0.5 per cent in February or potentially even earlier in December.

The Australian Bureau of Statistics also revealed housing approvals have fallen for 21 months in a row.

The number of dwellings approved in August 2019 was 25 per cent lower than the previous year in trend terms.

Australian Associated Press