Summary: Cash rate expectations barely moves; cash rate now expected to average 3.595% in May 2023; 3-month BBSW up 3bps; five increases to surveyed ADI cash rates.
Expectations for the path of actual cash rate through the remainder of 2022 and most of 2023 barely moved in comparison to 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 1.81% to 2.16% in September and then increase to 2.52% by October. November contracts implied a 2.885% cash rate while May 2023 contracts implied 3.595%. A week ago, the May 2023 contract’s price implied an average rate of 3.72%.
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 the latest monthly employment report and the latest quarterly wage report.
The minutes of the RBA Board’s August meeting which were released on Tuesday. Again, there was nothing to surprise markets but economists were left to ponder the strength of various statements regarding the Board’s views of a strong labour market against households’ worries in reference to high inflation and expectations of rising mortgage rates.
Westpac and the Melbourne Institute released the July reading of their leading index a day later. The annualised growth rate increased for a change and has been “broadly steady” for three months. Westpac described the result as “consistent with momentum continuing to track slightly above trend heading into year-end.”
The June quarter wage price index report came out a little later that morning. Wages grew by a touch less than expected in aggregate, an increase described as still “quite weak” given a tight labour market.
On Thursday, July’s Labour Force report undershot expectations in terms of additional jobs but the jobless rate declined from 3.6% to 3.5% as the participation rate fell back from its series high.
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3-month BBSW is a useful benchmark for cash rates and it finished the week 3bps higher at 2.33%. The RBA’s target for the overnight lending rate between banks is 1.85% but actual overnight interbank loans are still being negotiated at 1.81%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were five increases made by deposit-taking institutions in our survey of cash account interest rates this week. All five were in the order of 50bps to 60bps in size. The average rate across the 23 accounts rose from 1.12% to 1.23%.
3-month BBSW is a useful benchmark for cash rates and it finished the week 11bps higher at 2.30%. The RBA’s target for the overnight lending rate between banks is 1.85% but actual overnight interbank loans are still being negotiated at 1.81%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were nine increases made by deposit-taking institutions in our survey of cash account interest rates this week. Most of the increases were around 40bps to 50bps in size.
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.60% | |
| AMP Notice Account | 0.10% | |
| ANZ Premium | 0.15% | |
| ANZ Progress Saver | 1.65% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 1.00% | Minimum balance $500,000. |
| 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. |
| BoQ Bonus Interest Savings | 0.80% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.85% | |
| CBA Goal Saver Account | 1.50% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| 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% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.65% | On balances $0 - $500,000. Minimum $200 deposit each month and no withdrawals |
| Suncorp Growth Saver | 2.40% | Minimum $200 deposit each month and no more than 1 withdrawal |
| UBank Save Account | 1.60% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Up Saver Account | 2.35% | On a combined balance of upto $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Westpac eSaver | 0.85% | |
| Westpac Reward Saver | 1.85% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. |