Consumer sentiment has improved, with economists attributing the rebound to a change in views on interest rates, with most people now expecting rates to remain on hold or fall.

The widely watched monthly Westpac-Melbourne Institute survey showed a 4.3% rise in confidence back to 103.8 in February, after it had dipped in January. Westpac senior economist Matthew Hassan says the improved mood is largely due to a shift in stance on interest rates by the Reserve Bank.

Less than 43% of Australians now believe that interest rates will rise over the next year, down from about half in August. Hassan says there’s no sign so far in Westpac’s survey that price declines in the Sydney and Melbourne housing markets are were causing alarm.

“Confidence continues to bear up well,” he says. “The continued house-price correction, concentrated in Sydney and Melbourne, is impacting consumer expectations for prices but so far appears to be having only limited spill-over effects on wider confidence.”