The Westpac-Melbourne Institute consumer sentiment survey index for May has recorded its first increase – 2.7 per cent – since December last year, but remains close to April’s 15-year low.

At face value, the result implies muted support for the Rudd Government’s first budget, Westpac chief economist Bill Evans says.

The coalition budget of 2007, which included generous tax cuts, prompted sentiment to surge by 7.5 per cent to a record high, he said.

“The modest bounce is somewhat disappointing in light of a number of clearly positive factors for the consumer since the last survey.

“The Reserve Bank held rates steady at the May board meeting and indicated a degree of patience in their associated statement.”

He noted share markets and the Australian dollar also rose and, despite concerns about economic growth, labour markets remained strong.

“The clear offset to this news was the 3.8 per cent rise in petrol prices since the last survey,” Mr Evans said.

“Confidence would also have been shaken by the relentless rise in the world oil price which rose around 20 per cent over the same period.”

Wednesday’s release of board minutes from the Reserve Bank’s May meeting showed that a further increase in interest rates was seriously discussed and that rates are currently poised on a “knife edge”.

“There are clear signs that the economy is slowing and the modest rise in the consumer sentiment index does not change that assessment,” Mr Evans said.

“At this stage, we are standing by our view that the (Reserve) bank will see the desired slowing in activity that will not require another move.”