The high cost of living and interest rate hikes are potent enough to keep consumers feeling gloomy despite most people having jobs and attracting decent pay rises.
Consumer confidence improved a little last week, lifting 1.4 points, but the ANZ and Roy Morgan survey is still fixed well below historical averages.
The index came in at 77.3 points last week, well below the 111.4 monthly average since 1990.
ANZ senior economist Adelaide Timbrell said the improvement over the week was driven by optimism in financial conditions - present and future.
"But confidence was still among the worst 10 results since January 2020, seven of which have occurred between March and May of 2023," Ms Timbrell said.
She said the results spoke to the pressures felt from the high cost of living and rising interest rates, which were working against the low unemployment and accelerating wage growth.
Confidence among mortgage holders remains lower than for renters and those who own their homes outright.
A preliminary look at the activity levels in the private sector throughout May suggests the economy is holding up well.
The flash composite purchasing managers' index, which includes survey responses from both services and manufacturing businesses, fell from 53.0 in April to 51.2 in May.
A reading above 50 suggests the private sector is still expanding, but now at a slower pace than in April.
The manufacturing index stayed unchanged at 48 in May, which as a below-50 score, suggested another month of worsening conditions in the sector.
Activity across services businesses fell from 53.7 in April to 51.8 in May.
Judo Bank chief economic advisor Warren Hogan said Australia's economy was holding up well as it entered the winter months.
Mr Hogan also commented on the performance gap between manufacturing and services.
"The manufacturing indicators do not signal recession," he said.
"We would need to see a further marked deterioration in the manufacturing survey to be concerned about a sharper downturn."
The economist said the services sector was showing even fewer signs of recession but its resilience could complicate the Reserve Bank's job of returning inflation to its target of two to three per cent.
"The RBA is trying to engineer a soft landing to rid the economy of inflation," he said.
"But if they don't lean hard enough on monetary policy, we could see a more stubborn inflation emerge which will ultimately require a bigger lift in interest rates."
