As households evaluate their finances due to the interest rate increase the consumer confidence hit rock bottom in May.

After a slight rise last month, the Westpac-Melbourne Institute consumer sentiment index declined by 1.3 per cent during the month to 103.9 points.

According to Bill Evans, Westpac's chief economist, the "modest" result indicated consumers were preparing for interest rate hikes in the upcoming months.

"This is a modest adjustment to the Index but the result is still sending a subdued message about the state of the consumer today. This is the lowest level of the Index since June 2010, a month which followed three consecutive rate hikes by the Reserve Bank in March, April and May," Evans related in a statement.

While interest rates have been steady since November, the RBA had made it clear in the minutes of its May meeting that a rate rise is imminent. "Coverage of that development may have unnerved consumers," Evans said.

Westpac expects the RBA to lift rates in June nevertheless it does not see it as the start of a string of interest rate hikes.

"We expect that the Bank is still likely to raise rates by next month. However, we have also argued that such a move is unlikely to be the beginning of a sequence of moves with the next hike not being required until the June quarter next year." Evans explained.

The central bank indicated in the minutes of RBA’s meeting that in spite of the two-speed economy, it is preparing to raise interest rates to help confound inflationary pressure from the mining boom

More from IBT Markets:
Newsletter: To receive Global Markets update, sign up here