Summary: Cash rate expectations noticeably lower; cash rate now expected to average 3.80% in August 2023; 3-month BBSW down 16bps; no changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will be noticeably lower through the remainder of 2022 and 2023 in comparison with its expected path at the end of the previous week. At the end of the week, contracts implied the cash rate would rise from the current rate of 2.56% to average 2.80% in November, increase to an average of 2.98% in December and then to an average of 3.19% in February. August 2023 contracts implied 3.80%, down 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 Melbourne Institute’s September reading of its Inflation Gauge was released at the very start of the week. The index rose by 0.5% over the month and the annual rate accelerated from 4.9% to 5.0%.
Tuesday was a busy day for data releases.
ANZ’s September Job Ads survey reported a 0.5% decline for the month but a 22.3% increase over the corresponding month in 2021.
Dwelling approval numbers rebounded in August after July’s plunge, driven by a near-doubling of apartment approvals.
August home loan approval numbers fell by slightly less than expected, with more falls likely.
That afternoon, the RBA announced a 25bp increase to its cash rate target and the rate paid on exchange settlement balances, less than the 50bps which had been generally expected.
Preliminary trade figures for August were released on Thursday. They indicated Australia’s trade surplus declined from $9.0 billion after revisions in July to $8.2 billion. Exports rose by 2.6% to $56.7 billion while imports increased by 4.5% to $48.5 billion.
3-month BBSW is a useful benchmark for cash rates and it finished the week 16bps lower at 2.88%. 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 no changes made by deposit-taking institution in our survey of cash account interest rates this week. The average rate across the 23 accounts remained unchanged at 1.72%.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 2.60% | Minimum monthly $250 deposit. Limit $250,000. |
| AMP Notice Account | 0.10% | |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 1.65% | 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 | 1.40% | 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 | 0.85% | |
| CBA Goal Saver Account | 2.10% | Deposits must exceed withdrawals for bonus interest.0.15% base rate. |
| Great Southern Bank | 1.70% | No maximum balance |
| Heritage Online Saver | 1.85% | |
| ING Savings Accelerator | 2.60% | On balances over $150,000 |
| Macquarie CMA | 1.25% | |
| ME Online Savings | 2.70% | On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 0.85% | |
| NAB Reward Saver | 2.25% | 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 | 2.65% | No more than 1 withdrawal and balance must increase by $200 in month. |
| ubank Save Account | 3.35% | 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 | 2.35% | At least 1 deposit and deposits must exceed withdrawals for 1% bonus interest |