SYDNEY (Reuters) - Australian consumer sentiment edged up in December, although it ended its second worst year on record amid a surge in the cost of living and sharply higher interest rates, a survey showed on Tuesday.

The Westpac-Melbourne Institute index of consumer sentiment rose 2.7% in December from November, when it fell 2.6%. The index reading of 82.1 still showed pessimists greatly outnumbered optimists.

While ending on a slightly better note, 2023 still marks the second worst calendar year for sentiment on records dating back to 1974, said Westpac. The index has been below the neutral 100 mark since March 2022, the longest streak since the early 1990s recession.

Consumers heaved a sigh of relief, with a jump of 5.4% in confidence, after the Reserve Bank of Australia (RBA) last week left interest rates unchanged at a 12-year high of 4.35% after a rise in November to tame inflation.

"The RBA's decision to leave rates on hold at its final meeting of the year has eased concerns that further hikes are imminent," said Matthew Hassan, a senior economist at Westpac.

"However, this is small comfort for Australian consumers that have seen incomes come under extraordinary pressure from a surge in the cost of living, sharply higher interest rates and a rising tax take."

The Westpac survey found confidence among mortgage holders rose 5.4% to a still pessimistic 77.4.

The measure of family finances over the coming 12 months improved 3.9%. The economic outlook for the next year, however, slid 2.2%, but that for the next five years jumped 9.7%.

The measure of whether it was a good time to buy a major household item fell 3.8%