Summary: Cash rate expectations rise; cash rate now expected to average 3.91% in August 2023; 3-month BBSW up 24bps; seven increases to surveyed ADI cash rates.
Expectations 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 2.67% in October, increase to 3.07% in November and then to 3.31% in December. August 2023 contracts implied 3.91%, up from 3.57% 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.
Notable data or events which have the potential to affect domestic interest rate expectations included some private sector surveys as well as the latest employment figures.
NAB’s August business report was released on Tuesday. Readings of its conditions index and its confidence index both increased again but its capacity utilisation rate declined modestly from July’s series high.
The Westpac-Melbourne Institute’s September reading of their consumer sentiment index was also released. The latest reading of the index reversed course and increased modestly after months of falls.
August’s Labour Force report was released the next day. Employment growth was slightly under expectationsand the jobless rate ticked back up to 3.5% as the participation rate increased to 66.6%, just short of its series high.
The Melbourne Institute’s September reading of inflation expectations was released on Thursday. Inflation expectations over the coming 12 months came in at 5.4%, down from 5.9% in August but 1.00% higher than the 4.4% recorded in September 2021.
3-month BBSW is a useful benchmark for cash rates and it finished the week 24bps higher at 2.85%. 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 seven increases made by deposit-taking institutions in our survey of cash account interest rates this week. The increases ranged from 25bps to 50bps. The average rate across the 23 accounts rose from 1.46% to 1.59%.
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 | 1.40% | Minimum monthly balance of $5000. 0.05% base rate. |
| BoQ Bonus Interest Savings | 1.30% | 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 | 1.35% | |
| 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 | 1.85% | At least 1 deposit and deposits must exceed withdrawals for 1% bonus interest |