Summary: Cash rate expectations slightly lower; cash rate now expected to average 3.96% in August 2023; 3-month BBSW down 7bps; three changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will be slightly lower through the remainder of 2022 and the first half of 2023 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 2.81% to average 2.99% in December, increase to an average of 3.22% in February and then to an average of 3.43% in February. August 2023 contracts implied 3.96%, up from 3.95% 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 October reading of its Inflation Gauge was released at the very start of the week. The index rose by 0.4% over the month and the annual rate accelerated from 5.0% to 5.2%.
September’s private credit report came out at about the same time and it indicated total lending had increased by 0.7% over the month, in line with expectations. The annual growth rate accelerated from 9.3% to 9.4%.
September’s preliminary retail sales report was also released and it indicated retail spending had increased by 0.6% over the month, more than market expectations. Sales increased by 17.9% over the year, down from 19.2% in August.
September home loan approval numbers were released the next day. Total approvals fell by more than expected and further falls are expected.
September dwelling approval numbers were released at the same time and they fell but not by as much as expected. Approval for houses and apartments both fell.
That afternoon, the RBA announced another 25bp increase to its cash rate target and the rate paid on exchange settlement balances.
At the end of the week, the November Statement on Monetary Policy provided an update to the RBA’s various forecasts for GDP growth, inflation and unemployment rates. Forecast GDP growth rates were trimmed by 0.25%, underlying CPI rate forecasts were raised by either 0.50% or 0.50% and the unemployment rate was forecasted to rise to 4.00% by the end of June 2024.
3-month BBSW is a useful benchmark for cash rates and it finished the week 7bps lower at 3.04%. The RBA’s target for the overnight lending rate between banks is now 2.85% but actual overnight interbank loans are still being negotiated at 2.81%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were two changes made by deposit-taking institution in our survey of cash account interest rates this week. Rates on RAMS’ Saver Account and Up Bank’s Saver Account were both increased by 25bps. The average rate across the 22 accounts increased from 2.01% to 2.04%.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 3.60% | Minimum monthly $250 deposit. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 2.00% | Minimum (single) $10 deposit each month with no withdrawals. |
| 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 | 2.00% | Minimum monthly balance of $5000. 0.05% base rate. |
| BoQ Bonus Interest Savings | 1.60% | Maximum 1 withdrawal per month. 0.05% base rate. |
| CBA NetBank Saver | 1.10% | |
| CBA Goal Saver Account | 2.40% | Deposits must exceed withdrawals for bonus interest.0.15% base rate. |
| Great Southern Bank | 2.20% | No maximum balance |
| Heritage Online Saver | 2.10% | |
| ING Savings Accelerator | 2.80% | On balances over $150,000 |
| Macquarie CMA | 1.50% | |
| ME Online Savings | 3.00% | On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 1.10% | |
| NAB Reward Saver | 2.50% | At least 1 deposit and no withdrawals in month |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals |
| Suncorp Growth Saver | 2.90% | No more than 1 withdrawal and balance must increase by $200 in month. |
| ubank Save Account | 3.60% | On a combined balance of upto $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Up Savers Account | 2.85% | Make 5 purchases using Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 0.85% | |
| Westpac Reward Saver | 2.60% | At least 1 deposit and deposits must exceed withdrawals for 1% bonus interest |