Summary: Cash rate expectations pull back; cash rate now expected to average 3.57% in August 2023; 3-month BBSW up 12bps; one increase to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the cash rate will be generally 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 2.59% in October, increase to 2.91% in November and then to 3.12% in December. August 2023 contracts implied 3.57%, down from 3.87% 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 a rate decision as well as the latest GDP figures.
ANZ’s August Job Ads survey was released at the very start of the week. It reported a 2.0% rise for the month and a 20.2% increase over the corresponding month in 2021.
The Melbourne Institute’s August reading of its Inflation Gauge was also released. The index fell by 0.5% over the month and the annual rate slowed from 5.4% to 4.9%.
The RBA Board met for its September meeting on Tuesday. As widely expected, it increased both its cash rate target and the rate paid on exchange settlement balances by another 50bps.
The June quarter report on construction work done was released at the same time. Work done fell by 3.8%, in contrast with expectations of a 2.5% increase.
Midweek, June quarter GDP figures came in slightly under expectations at 0.9% for the quarter and 3.6% for the year. Increased household consumption as well as exports were the main drivers, while slower inventory growth was the main drag.
Preliminary trade figures for July were released on Thursday. They indicated Australia’s trade surplus dropped from $17.1 billion after revisions in June to $8.7 billion. Exports fell by 9.9% to $55.3 billion while imports increased by 5.2% to $46.5 billion.
3-month BBSW is a useful benchmark for cash rates and it finished the week 12bps higher at 2.61%. 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 was one increase made by a deposit-taking institution in our survey of cash account interest rates this week. Arab Bank increased its Personal Online Savings Account by 30bps. The average rate across the 23 accounts rose from 1.41% to 1.42%.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.60% | Minimum monthly $250 deposit. Limit $250,000. |
| AMP Notice Account | 0.10% | |
| ANZ Premium | 0.15% | $500,000 - $4,999,999 |
| ANZ Progress Saver | 1.65% | Minimum (single) $10 deposit each month with no withdrawals. |
| Arab Bank Online Savings | 1.30% | On balances of $500,000 and above |
| Bankwest Smart eSaver | 1.10% | On balances up to $500,000.99. No withdrawals per month |
| BOQ Fast Track Saver | 0.05% | Minimum monthly balance of $5000. 1.4% bonus applied when conditions met. |
| BoQ Bonus Interest Savings | 1.30% | Maximum 1 withdrawal per month. 0.05% base rate. |
| CBA NetBank Saver | 0.85% | |
| CBA Goal Saver Account | 1.50% | No maximum balance. Deposits must exceed withdrawals for bonus interest. |
| Great Southern Bank | 1.70% | No maximum balance |
| Heritage Online Saver | 1.35% | Minimum balance $250,000 |
| ING Savings Accelerator | 2.10% | Minimum balance $150,000 |
| Macquarie CMA | 0.90% | Minimum balance $5000 |
| ME Online Savings | 2.20% | On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 0.85% | |
| NAB Reward Saver | 1.75% | 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 | 2.40% | Minimum $200 deposit each month and no more than 1 withdrawal |
| 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 |