Summary: Cash rate expectations path slightly steeper through 2022, first half of 2023; cash rate now expected to average 1.97% in February 2023; stream of notable data releases; no changes to ADI cash rates in survey.
Expectations moved to reflect a slightly steeper path for the actual cash rate through 2022 and 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 0.070% to 0.14% by May and then increase to 0.765% by August. November contracts implied a 1.58% cash rate while February 2023 contracts implied 1.97%. A week ago, the February 2023 contract’s price implied an average rate of 1.87%.
Since March 2020, the RBA has not enforced its cash rate target by draining liquidity from the banking system via changes in the total of ESA balances. As a result, the actual cash rate has been noticeably below the target rate, even after the RBA reduced this target to 0.10%. As such, contract prices only reflect expectations of the average actual cash rate in a given month and not some estimate of the likelihood of the RBA changing its target.
Notable economic data or events which had the potential to affect domestic interest rate expectations were released in a steady stream this week. However, the reports were all pretty much secondary in importance.
On Tuesday, February preliminary retail sales report indicated retail spending had increased by 1.8% over the month, exceeding expectations of a 0.9% rise. Sales increased by 9.1% over the year, up from January’s 6.3%.
A couple of days later, February’s private credit report indicated total lending increased by 0.6% over the month, in line with expectations and taking the annual growth rate from 7.6% to 7.9%, the highest since November 2008.
February’s home approvals report was released at about the same time. Approvals shot up by 43.5% in terms of numbers, more than reversing the 27.1% drop in January.
Home loan approval figures for February came out at the end of the week. They contrasted with the jump in home approvals, declining by 3.7% in dollar terms. Approvals for owner-occupier loans fell by 5.4%.
3 month BBSW is a useful benchmark for cash rates and it finished the week 2bps higher at 0.23%. Currently, the RBA’s target for the overnight lending rate between banks is 0.10% but actual overnight interbank loans are still being negotiated at 0.07%, 7bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were no changes made by deposit-taking institutions in our survey of cash account interest rates this week.
| 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 | 0.15% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 0.50% | Minimum balance $500,000. |
| Bankwest Smart eSaver | 0.25% | 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 | 0.25% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.05% | |
| CBA Goal Saver Account | 0.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 0.35% | No maximum balance |
| Heritage Online Saver | 0.25% | Minimum balance $250,000 |
| ING Savings Accelerator | 0.65% | Minimum balance $150,000 |
| Macquarie CMA | 0.00% | Minimum balance $5000 |
| ME Online Savings | 0.05% | |
| NAB iSaver | 0.05% | |
| NAB Reward Saver | 0.25% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.15% | On balances from $200 - $500,000. Minimum $200 deposit and no withdrawal per month |
| Suncorp Growth Saver | 0.05% | |
| UBank USaver | 0.50% | Limit $200,000. Minimum $200 deposit per month. |
| UBank USaver Ultra | 0.05% | Limit $200,000. Minimum $200 deposit per month. |
| Up Saver Account | 1.05% | Calculated daily, paid monthly once qualfied |
| Volt Bank | 0.90% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.15% | Minimum $50 deposit and no withdrawal per month |
| 86400 Save account | 1.20% | On balances upto $50,000 |