National Australia Bank has dramatically revised its interest rate forecast, abandoning expectations of another Reserve Bank increase and instead predicting that the next movement in official rates could be downward.

The change comes as fresh Westpac-Melbourne Institute consumer sentiment figures revealed Australians remain deeply pessimistic about their financial outlook, with reactions to the recent Federal Budget ranking among the most negative recorded in the survey's history.

NAB economists Sally Auld and Gareth Spence said they no longer expect the Reserve Bank of Australia to lift the cash rate again this year. Instead, they believe the current cash rate has likely reached its peak.

"We no longer expect the RBA to hike by 25 basis points in August, and now see the cash rate peaking at the current rate for the cycle," NAB said in its latest economic update. "The next move in the cash rate is likely to be down, but the timing is uncertain."

The revised forecast reflects growing concerns about slowing economic activity, weakening consumer confidence and rising unemployment, despite inflation remaining above the Reserve Bank's preferred target range.

The latest Westpac-Melbourne Institute Consumer Sentiment Index fell to 80.6 points in June, indicating that pessimists continue to significantly outnumber optimists. Any reading below 100 reflects negative sentiment among households.

Westpac's head of Australian macro-forecasting, Matthew Hassan, described the result as one of the weakest recorded in the survey's five-decade history.

"At 80.6, the latest monthly index read is back amongst the weakest seen in the fifty-year history of the survey," Hassan said.

Rising mortgage repayments, persistent inflation, higher petrol prices and uncertainty surrounding recent policy changes have continued to place pressure on household budgets.

The survey found many Australians remain concerned about their family finances, with cost-of-living issues dominating public sentiment. Inflation and budget-related policies were identified as key factors influencing confidence levels.

The findings also highlighted cooling expectations within the housing market, as consumers reassessed their outlook amid affordability concerns and broader economic uncertainty.

While some major banks continue to anticipate further interest rate increases, NAB's revised outlook suggests that weakening economic conditions could eventually prompt the Reserve Bank to consider easing monetary policy.

Financial markets remain divided over the timing of any future changes, with economists closely monitoring inflation trends, employment figures and consumer spending patterns in the months ahead.

For Australian households already grappling with elevated living costs, NAB's updated forecast may offer a degree of hope that borrowing costs could stabilise or potentially decline in the future.

However, economists caution that any decision by the Reserve Bank will depend heavily on incoming economic data and whether inflation returns sustainably towards its target range.

With consumer confidence hovering near historic lows and families continuing to feel financial strain, the outlook for Australia's economy remains uncertain as policymakers balance the competing challenges of inflation control and supporting economic growth.