Summary: Cash rate expectations path steeper through remainder of 2022, slightly flatter in first half 2023; cash rate now expected to average 3.525% in May 2023; one increase to surveyed ADI cash rates.
Expectations moved to reflect a slightly steeper path for the actual cash rate through the remainder of 2022 but a slightly flatter path through the first half of 2023 in comparison to its 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 1.31% to 1.715% in August and then increase to 2.04% by September. November contracts implied a 2.80% cash rate while May 2023 contracts implied 3.525%. A week ago, the May 2023 contract’s price implied an average rate of 3.56%.
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 economic data or events which have the potential to affect domestic interest rate expectations were concentrated in the early part of the week, including an RBA Board meeting.
ANZ’s June Job Ads survey was released at the very start of the week. It reported a 0.3% rise, taking total advertisements to their highest since August 2008.
The Melbourne Institute’s June reading of its Inflation Gauge was also released. The index increased by 0.3% over the month while the annual rate of increase slowed from 4.8% to 4.7%.
Home loan approval and home approvals figures for May both came out later in the morning. Loan approval numbers surprised economists, rising by 1.7% in dollar terms and by 2.9% in number terms. Approvals for the building of new homes also increased, rising by 9.9%, although the downtrend is still in place, according to Westpac.
The RBA Board met for its July meeting the next day. As widely expected, it increased its cash rate target and the rate paid on exchange settlement balances by 50bps each.
Preliminary trade figures for May were released on Thursday. They indicated Australia’s trade surplus increased from $13.3 billion after revisions in April to $16.0 billion. Exports rose by 9.5% to $58.4 billion while imports increased by 5.8% to $42.4 billion.
3-month BBSW is a useful benchmark for cash rates and it finished the week 7bps higher at 1.81%. The RBA’s target for the overnight lending rate between banks is now 1.35% but actual overnight interbank loans are still being negotiated at 1.31%, 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. Great Southern Bank upped its eSaver Flexi rate by 50bps.
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.10% | |
| AMP Notice Account | 0.10% | Minimum 31 days notice |
| ANZ Premium | 0.15% | |
| ANZ Progress Saver | 0.65% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 0.75% | Minimum balance $500,000. |
| Bankwest Smart eSaver | 0.50% | On balances from $500,000 to $5,000,000. No withdrawal per month |
| BOQ Fast Track Saver | 0.05% | Minimum monthly balance of $5000. |
| BoQ Bonus Interest Savings | 0.60% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.30% | |
| CBA Goal Saver Account | 0.75% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 1.20% | No maximum balance |
| Heritage Online Saver | 0.60% | Minimum balance $250,000 |
| ING Savings Accelerator | 1.20% | Minimum balance $150,000 |
| Macquarie CMA | 0.25% | Minimum balance $5000 |
| ME Online Savings | 0.05% | |
| NAB iSaver | 0.30% | |
| NAB Reward Saver | 0.50% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.40% | On balances from $200 - $500,000. Minimum $200 deposit and no withdrawal per month |
| Suncorp Growth Saver | 1.30% | |
| UBank USaver | 1.10% | Limit $200,000. Minimum $200 deposit per month. |
| UBank USaver Ultra | 0.10% | Limit $200,000. Minimum $200 deposit per month. |
| Up Saver Account | 1.85% | Calculated daily, paid monthly once qualfied |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.85% | Minimum $50 deposit and no withdrawal per month |