SYDNEY (Reuters) – Australian consumer sentiment recovered in August as interest rate concerns eased and the outlook for family finances improved following the government’s tax cuts and other cost-of-living measures, a survey showed on Tuesday.

The Westpac-Melbourne Institute’s consumer sentiment index rose 2.8 percent in August, after falling 1.1 percent in July. The index reading of 85 showed that pessimists still far outnumbered optimists.

“Consumers breathed a slight sigh of relief in August as the RBA board left interest rates unchanged and support from tax cuts and other fiscal measures became more evident,” said Matthew Hassan, chief economist at Westpac.

In particular, an indicator for family finances rose by 11.7 percent in August, the largest monthly increase in nine years. This increase was strongest among low-income earners, said Hassan.

The Reserve Bank of Australia (RBA) left interest rates unchanged at its August meeting after debating a further hike. A short-term rate cut was virtually ruled out as core inflation is expected to ease only gradually.

Markets are now betting on an easing by the end of the year, after only recently hinting at the risk of another interest rate hike.

According to the survey, the proportion of respondents who expect higher mortgage rates in the next twelve months fell by 14.9 percent in August.

The index, which measures whether it is a good time to buy major household items, rose 0.6 percent but is still at a historic low of 82.6.

(Reporting by Stella Qiu; Editing by Jacqueline Wong)