A key measure of Australian consumer confidence bounced modestly in April as people grew more optimistic on the economy for the year ahead and felt better placed to buy major household items.

The survey of 1,200 people by Westpac Bank and the Melbourne Institute released on Wednesday showed its index of consumer sentiment rose 1.2 per cent to 105.3. But that only recouped half of the drop suffered in March and left the index down 9.3 per cent on April last year.

The gauge has fluctuated between positive and negative results each month for the past nine months.

"This is a fairly predictable, yet lacklustre result. Over the month households have been exposed to both positive and negative influences," said Bill Evans, chief economist at Westpac.

On the positive side, the Reserve Bank of Australia left interest rates unchanged at its April policy meeting last week, and jobs data showed a big increase for March. The high Australian dollar also seemed to make people feel better off.

On the other hand the Japanese earthquake, turmoil in the Middle East and rising oil prices all weighed on sentiment.

The largest improvement came in the index measuring whether it was a good time to buy a major household item which rose 3.5 per cent in April, to be up 4.5 per cent for the year.

That was followed by a 3.4 per cent increase in the component index reflecting economic conditions for next 12 months, and a 1.4 per cent rise in the index about family finances over the next 12 months.

However, the index about economic conditions next 5 years fell by 3.3 per cent.

Overall, the current conditions index rose 2.2 per cent while the expectations index edged up 0.5 per cent.

There was also a wide divergence between city dwellers and those in the country. The confidence index for non metropolitan respondents surged by 12.2 per cent in the month.

Evans said that was probably due to rising prices for soft commodities including beef, wheat, lamb and cotton and extensive rainfall in eastern Australia.

In contrast the index for metropolitan respondents fell by 4.6 per cent.

"This most likely points to the greater importance in the cities of those factors we believe are weighing on households - high debt levels; fragile house prices; sharp increases in interest rates over the last year or so; and rising health; utility and education costs," said Evans.

Consumer confidence readings are starting to reflect the experience at the shopfront, according to the Australian National Retailers Association (ANRA).

ANRA CEO Margy Osmond said while the Westpac Melbourne Institute Index of Consumer Sentiment reported a 1.2 per cent lift in April, she agreed with their assessment that the result was ‘lacklustre’.

“Retailers will not be surprised to see only a slight rise in confidence overall, and the drop of 4.6 per cent in city dwellers confidence will resonate strongly with the sector. Retailers are still choosing to keep goods discounted to compete not only with the online offerings, but also with a consumer who needs to be convinced to make a purchase, even for goods they might need.

“The ‘good time to buy a major household appliance’ index remains strong, but has not been a good predictor of consumer behaviour recently and reflects the high Australian dollar and heavy price competition in this sector.

“On the plus side it’s good to see the rural sector feeling more positive, with the weather contributing to good growing conditions and agriculture prices riding high. If we can get some of those rural dwellers into town to the shops retailers would be very happy to see them,” Mrs Osmond said.

With Reuters