Summary: Cash rate expectations higher; cash rate now expected to average 4.30% in August 2023; 3-month BBSW up 14bps; five changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will higher through the remainder of 2022 and 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 2.56% to average 2.84% in November, increase to an average of 3.05% in December and then to an average of 3.29% in February. August 2023 contracts implied 4.30%, up from 3.94% 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 October meeting which were released on Tuesday. Given the RBA’s decision to increase the cash rate by 25bps rather than 50bps, economists were keen to gain further insights from the minutes. Apparently, it easily could have been a 50bps rise but the Board decided rates had been raised quickly since May and some slowdown was wise given the lagged effects of changes to monetary policy.
Westpac and the Melbourne Institute released the September reading of their leading index a day later. The annualised growth rate went further into negative (below trend) territory and Westpac now expects just 1.0% GDP growth in 2023.
September’s Labour Force report was released on Thursday. Employment growthwas less than expected but the jobless rate remained steady at 3.5% and the participation rate remained unchanged at 66.6%.
3-month BBSW is a useful benchmark for cash rates and it finished the week 14bps higher at 3.06%. The RBA’s target for the overnight lending rate between banks is now 2.60% but actual overnight interbank loans are still being negotiated at 2.56%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were five changes made by deposit-taking institution in our survey of cash account interest rates this week. Rates on Westpac’s Life account and Heritage’s Online Saver account were both raised by 25bps; Mebank’s Online Savings account’s rate was increased by 30bps; the rate on eSaver’s Flexi account had 50bps added to it; AMP Bank’s rate was increased by 100bps. The average rate across the 23 accounts rose from 1.82% to 1.92%.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 3.60% | Minimum monthly $250 deposit. Limit $250,000. |
| AMP Notice Account | 0.10% | |
| 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 | 1.15% | 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 | 2.60% | 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 |