Summary: Cash rate expectations lower; cash rate now expected to average 3.88% in February 2024; 3-month BBSW up 1bp; two changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will be lower through 2023 and the first half 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 3.57% to average 3.665% in April, increase to an average of 3.785% in May and then to an average of 3.945% in August. February 2024 contracts implied 3.88%, down from 4.12% 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 Melbourne Institute’s February reading of its Inflation Gauge was released at the very start of the week. The index increased by 0.4% over the month and the annual rate slowed a touch from 6.4% to 6.3%.
Preliminary trade figures for January were released the next day. They indicated Australia’s trade surplus decreased from $13.0 billion after revisions in December to $11.7 billion. Exports rose by 1.4% to $58.8 billion and imports rose by 4.6% to $47.2 billion.
That afternoon, the RBA announced another 25bps increase to its cash rate target and the rate paid on exchange settlement balances, as expected. The accompanying statement repeated the Bank’s expectation of additional future rate rises.
3-month BBSW is a useful benchmark for cash rates and it finished the week 1bp higher at 3.64%. The RBA’s target for the overnight lending rate between banks is now 3.60% but actual overnight interbank loans are being negotiated at 3.57%, 3bps below the target but 7bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were two changes made by deposit-taking institutions in our survey of cash account interest rates this week. The rates paid on Bank of Queensland’s Bonus Interest Savings Account was increased by 25bps while the rate on Me Bank’s Online Savings Account was raised by 50bps. The average rate across the 22 accounts rose from 2.71% to 2.75%.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 4.10% | Minimum monthly $1000 deposit. On balances up to $250,000. |
| ANZ Premium | 0.05% | On balances of $10,000 - $499,999 |
| ANZ Progress Saver | 3.50% | 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 | 1.60% | 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. Base rate of 0.05%. |
| BoQ Bonus Interest Savings | 2.25% | Maximum 1 withdrawal per month. 0.05% base rate. |
| CBA NetBank Saver | 1.60% | |
| CBA Goal Saver Account | 4.00% | At least 1 deposit required; balance at end of month must exceed balance at start of month (excluding interest). |
| Great Southern Bank | 3.90% | |
| Heritage Online Saver | 2.80% | |
| ING Savings Accelerator | 3.45% | $150,000 and over |
| Macquarie CMA | 2.10% | |
| ME Online Savings | 3.75% | On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 1.35% | |
| NAB Reward Saver | 4.00% | Make at least one deposit on or before the second last banking day of the month and no withdrawals during the month |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals. |
| Suncorp Growth Saver | 4.25% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 4.35% | On a combined balance of up to $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Up Savers Account | 3.60% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 0.85% | |
| Westpac Reward Saver | 4.00% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. |