Summary: Cash rate expectations ease slightly; cash rate now expected to average 4.095% in August 2023; 3-month BBSW up 13bps; two increases 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 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 2.31% to average 2.695% in October, increase to an average of 3.09% in November and then to an average of 3.325% in December. August 2023 contracts implied 4.095%, down from 4.16% 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.
August’s preliminary retail sales report came out midweek and it indicated retail spending had increased by 0.6% over the month, more than market expectations. Sales increased by 19.2% over the year, up from 16.5% in July.
New monthly CPI figures from the ABS were released a day later. The index increased by 7.0% over the year to July and by 6.8% over the year to August. A “core” measure excluding prices of fruit, vegetables and fuel increased by 6.2% over the year to August, up from 5.5% to the end of June.
August’s private credit report was released at the end of the week and it indicated total lending had increased by 0.8% over the month, above expectations. The annual growth rate accelerated from 9.1% to 9.3%, the fastest pace since 2008.
3-month BBSW is a useful benchmark for cash rates and it finished the week 13bps higher at 3.04%. The RBA’s target for the overnight lending rate between banks is 2.35% but actual overnight interbank loans are still being negotiated at 2.31%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were two increases made by deposit-taking institution in our survey of cash account interest rates this week. Ubank raised its rate on its Save account by 50bps, as did Up Bank with its Saver account. The average rate across the 23 accounts rose from 1.67% to 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 |