Summary: Cash rate expectations for 2023 higher; cash rate now expected to average 4.48% in May 2024; 3-month BBSW up 9bps; nine changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the path of the cash rate will be higher through 2023 and most of 2024 in comparison with its expected path at the end of the previous week. Contracts at the end of the week implied the cash rate would rise from the current rate of 4.07% to average 4.215% in July, move up to an average of 4.395% in August and then average 4.645% in November. February 2024 contracts implied a cash rate of 4.615%, 55bps above the current cash rate, while May 2024 contracts implied 4.48%, up from 4.275% a week ago.
Since March 2020, the RBA has not enforced its cash rate target by draining liquidity from the banking system. As a result, the actual cash rate has been noticeably below the target rate. As such, contract prices only reflect expectations of the average actual cash rate in a given month and not the implied likelihood of the RBA changing its target.
The Westpac-Melbourne Institute’s June reading of their consumer sentiment index came out Tuesday morning. The index crept a little higher but probably would have higher except for another RBA increase.
NAB’s May business report was released at about the same time and the latest reading of its conditions index fell for a fourth consecutive month while its confidence index also fell. NAB’s measure of capacity utilisation rate eased back to 84.7%.
May’s Labour Force report was released on Thursday. Total employment increased noticeably more than expected and the jobless rate ticked down to 3.6%. The participation rate increased to 66.9%, an all-time high.
The Melbourne Institute’s June reading of inflation expectations was released the same day. Inflation expectations over the coming 12 months came in at 5.2%, unchanged from May’s figure but down from the 6.70% which was recorded in June 2022.
3-month BBSW is a useful benchmark for cash rates and it finished the week 9bps higher at 4.30%. The RBA’s target for the overnight lending rate between banks is 4.10% but actual overnight interbank loans are being negotiated at 4.07%, 3bps below the target but 7bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were nine changes changes made by deposit-taking institutions in our survey of cash account interest rates this week. Not all were increases of 25bps; the smallest increase of 15bps came from NAB’s iSaver account while the largest increase, 35bps, came from ING’s Saver Accelerator.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 4.80% | Min. monthly $1,000 dep. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 4.25% | Make at least one deposit of $10 or more in a month, make no withdrawals (including transfers), or incur any fees, charges in the month. |
| Arab Bank Online Savings | 1.00% | On balances of $250,000 to $499,999 |
| Bankwest Smart eSaver | 2.20% | On balances up to $500,000.99 with no withdrawals in that month |
| BOQ Fast Track Saver | 2.50% | $1000 minimum monthly deposit. On balances up to $250,000, over part the Base Rate of 0.05% p.a. applies |
| BoQ Bonus Interest Savings | 2.50% | Bonus interest is paid into your account when you limit your withdrawals to a maximum of one per month |
| CBA NetBank Saver | 2.20% | 2.40% p.a. fixed bonus margin for the first 5 months on your first NetBank Saver |
| CBA Goal Saver Account | 4.65% | At least 1 deposit required; balance at end of month must exceed balance at start of month. |
| Great Southern Bank | 4.00% | No bonus conditions |
| Heritage Online Saver | 3.25% | $1 or more, bonus intro rate 1.45% (promotional 4 month rate on new accounts up to $100,000) |
| ING Savings Accelerator | 4.35% | $150,000 and over |
| Macquarie CMA | 2.50% | Minimum $5,000 |
| ME Online Savings | 4.00% | Have both Online Savings Account and Everyday Transaction Account. On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 2.00% | Bonus rate 2.65% for the first four months when you open your first NAB iSaver account |
| NAB Reward Saver | 4.75% | make at least one deposit on or before the second last banking day of the month and no withdrawals during the month |
| Rabobank PremiumSaver | 4.85% | On balances to $250,000. Balance increased by $200 a month. |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals. |
| Suncorp Growth Saver | 4.85% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 4.75% | On a combined balance of up to $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Up Savers Account | 4.10% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 1.10% | 4.25% p.a. for the first 5 months for new Westpac eSaver customers |
| Westpac Reward Saver | 4.50% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. Keep your account balance above $0 at all times. |