Summary: Cash rate expectations generally higher; cash rate now expected to average 4.195% in February 2024; 3-month BBSW up 4bps; four changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will be generally higher 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 3.32% to average 3.505% in March, increase to an average of 3.92% in May and then to an average of 4.215% in August. February 2024 contracts implied 4.195%, up from 4.095% 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 minutes of the RBA Board’s February meeting were released on Tuesday. Unlike the minutes from the previous meeting in December, economists generally interpreted them as “hawkish” in tone.
The December quarter wage price index report was released the next day. Wages grew by less than expected in aggregate.
Westpac and the Melbourne Institute released the January reading of their leading index the same morning. While the annualised growth rate increased, it remained firmly in negative (below trend) territory.
The December quarter report on construction work done produced a 0.4% decline, in contrast with expectations of a 1.5% increase.
The latest capital expenditure report was released on Thursday. A 2.2% rise in the December quarter was posted and total capex was up 3.6% over the year.
3-month BBSW is a useful benchmark for cash rates and it finished the week 4bps higher at 3.51%. The RBA’s target for the overnight lending rate between banks is 3.35% but actual overnight interbank loans are still being negotiated at 3.32%, 3bps below the target but 7bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were four changes made by deposit-taking institutions in our survey of cash account interest rates this week. Rates paid on BOQ’s Fast Track Saver Account, Heritage’s Online Saver Account and Westpac’s Life Account all increased by 25bps while Macquarie increased its Cash Management Account rate by 10bps.
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 | 2.00% | 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 | 3.25% | 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 | 4.10% | On a combined balance of up to $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Up Savers Account | 3.35% | 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. |