The Westpac-Melbourne Institute Consumer Sentiment Index rose to a three-year high of 95.9 in March from 92.2 in February as the Reserve Bank of Australia's (RBA) rate cut helped ease financial pressures, according to a Tuesday report.

"The RBA's decision to cut interest rates in February and a further easing in cost-of-living pressures have provided a clear lift," said Matthew Hassan, head of Australian macro-forecasting at Westpac.

The labor market outlook notably improved, while buyer sentiment appeared to be recovering from its "exceptionally" weak level in the past two years. The latter can be seen in the "time to buy a major household item" sub-index, which rose to 97.1 in March from 90.9 in February.

The Westpac consensus is for the RBA to keep the rates unchanged at the March 31-April 1 meeting. Hassan said a further decline in inflation will support more rate cuts this year, with the next move likely at the May meeting.

"That in turn suggests the gradual consumer recovery, which this latest consumer sentiment update shows rests on an expectation of further interest rate easing, should remain on track," Hassan added.