Summary: Cash rate expectations rise again; cash rate now expected to average 4.161% in August 2023; 3-month BBSW up 6bps; four increases to surveyed ADI cash rates.
Expectations again moved this week in a manner which suggested the cash rate will be generally higher 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 2.69% in October, increase to 3.10% in November and then to 3.34% in December. August 2023 contracts implied 4.16%, up from 3.91% 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 September meeting which were released on Tuesday. There was nothing really surprising in them but some observers noted the discussion of the merits of a 25bps rise against a 50bps rise. Smaller rate rises are expected in the near-term and markets have been looking for any sign of a shift by the RBA.
Westpac and the Melbourne Institute released the August reading of their leading index a day later. The annualised growth rate went into negative territory, signifying below trend GDP growth. Westpac described the result as “ pointing to a material loss in momentum…”
The September “flash” reading of S&P Global Market Intelligence’s composite PMI was released early on Tuesday morning and it produced a small increase in the index from 50.2 in August to 50.8. S&P economist Laura Denman noted “… recent interest rate hikes made by the RBA have begun to have the desired effect…” and “Inflationary pressures have eased significantly…” A reading above 50 indicates an expansion in comparison to the previous month and the higher the reading, the greater the expansion rate.
3-month BBSW is a useful benchmark for cash rates and it finished the week 6bps higher at 2.91%. The RBA’s target for the overnight lending rate between banks is now 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 four increases made by deposit-taking institutions in our survey of cash account interest rates this week. BoQ raised rates on its Bonus Interest Savings and Fast Track Saver accounts by 30bps and 60bps respectively while Heritage’s Online Saver rate and Westpac’s Life rate were each increased by 50bps. The average rate across the 23 accounts rose from 1.59% to 1.67%.
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 | 2.85% | On a combined balance of upto $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Up Savers Account | 2.10% | 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 |