Summary: Cash rate expectations higher; cash rate now expected to average 3.68% in February 2024; 3-month BBSW up 11bps; one change to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will be 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 3.07% to average 3.245% in February, increase to an average of 3.685% in May and then to an average of 3.78% in August. February 2024 contracts implied 3.68%, up from 3.44% 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.
NAB’s December business report was released on Tuesday. The latest reading of its conditions index decreased while its confidence index reading increased. NAB’s measure of capacity utilisation declined, albeit to a still-elevated level.
The December quarter Consumer Price Index was released the next day. The index rose by 1.8% over the quarter, above expectations, thus taking the annual rate from 7.3% to 7.8%. The RBA’s preferred measure of inflation also increased by more than expected.
Westpac and the Melbourne Institute released the December reading of their leading index on the same day. The annualised growth rate essentially remained unchanged, well in negative (below trend) territory.
December quarter producer price indices were released at the end of the week. The PPI rose by 0.7% over the quarter and by 5.8% on an annual basis, down from 6.4% in the September quarter.
3-month BBSW is a useful benchmark for cash rates and it finished the week 11bps higher at 3.38%. The RBA’s target for the overnight lending rate between banks is 3.10% but actual overnight interbank loans are still being negotiated at 3.07%, 3bps below the target but 7bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There was one change made by a deposit-taking institution in our survey of cash account interest rates this week. Suncorp increased its Growth Saver Account rate by 30bps.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 4.10% | Min. monthly $250 dep. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 2.50% | 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 | 1.50% | On balances up to $500,000.99 with no withdrawals in that month |
| BOQ Fast Track Saver | 2.25% | $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 | 2.00% | Bonus interest is paid into your account when you limit your withdrawals to a maximum of one per month |
| CBA NetBank Saver | 1.60% | $1 or more, 2.15% p.a. fixed bonus margin for the first 5 months on your first NetBank Saver |
| CBA Goal Saver Account | 3.25% | Balance at end of month must exceed balance at start of month. |
| Great Southern Bank | 3.20% | No bonus conditions |
| Heritage Online Saver | 2.55% | $1 or more, bonus intro rate 1.45% (promotional 4 month rate on new accounts up to $100,000) |
| ING Savings Accelerator | 3.20% | $150,000 and over |
| Macquarie CMA | 2.00% | No bonus conditions |
| ME Online Savings | 3.25% | On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 1.10% | Bonus rate 2.65% for the first four months when you open your first NAB iSaver account |
| NAB Reward Saver | 3.25% | 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, balance between $200 - $500,000 for the month |
| Suncorp Growth Saver | 4.00% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 4.10% | Rate applies since 1 January 2023. On a combined balance of upto $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% | 3.75% p.a. for the first 5 months for new Westpac eSaver customers |
| Westpac Reward Saver | 3.75% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. |