Summary:
Australia’s 10-year government bond yield fell 13 bps to around 4.27%, its lowest level in a month, as investors sought safe-haven assets after U.S. President Donald Trump unveiled massive increases in tariffs, deepening a global trade war that could hurt economic growth.
On Tuesday, the RBA kept interest rates unchanged as expected. The board noted that core inflation was cooling as anticipated but emphasized the need for assurance that this trend would continue. The central bank also signalled a slightly dovish shift by removing references to caution on further easing. Governor Michele Bullock suggested the economy might be stronger than it appears, noting that there were no discussions about a May rate cut. While confidence in disinflation is growing, she reiterated the need for careful policy management without committing to future rate moves.
The RBA decision was dwarfed by the tariff announcement but there is a high degree of interaction. The broad expectation amongst economists, and indeed the market, is the Trump announcement will lead to a more dovish monetary policy stance in the near term from the RBA. The RBA could be more concerned about the indirect impacts to confidence, particularly ongoing uncertainty that affects global business investment and funding flows. The transmission channel for the RBA would be through potentially tighter financial conditions and less domestic business investment on the part of firms. The RBA would also potentially be on the lookout for lower household spending and higher precautionary savings.
Indeed, Traders have turbocharged bets for an interest rate cut next month on worries about a global economic recession. Money markets are fully priced for the Reserve Bank to reduce policy by a quarter of a point in May, taking the cash rate to 3.85 per cent. They had ascribed a chance of about 70 per cent before the announcement. Traders now expect a total of 90 basis points of easing over the next 12 months, equivalent to between three and four rate reductions. They had previously anticipated between two and three rate cuts. But this possibly be an overshoot but nevertheless the market is pricing a global recession risk.
By sheer coincidence, the RBA released its Financial Stability Review on Thursday. While the document was written prior to the tariff release, the RBA warns that US trade policies and nations’ responses could have a “chilling effect” on global business investment and household spending. But here’s the point – the actual tariff levels were higher than expected by the market and particularly hard on important Australian Asian export markets.
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 5.20% | Min. monthly $1,000 dep. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 4.10% | Make at least one deposit of $10 or more in a month, make no withdrawals (including transfers), or incur any fees, charges in the month. |
| Arab Bank Online Savings | 4.35% | On balances of $250,000 to $499,999 |
| Bankwest Hero Saver | 4.60% | On balances up to $250,000.99 with no withdrawals in that month |
| BOQ Fast Track Saver | 2.75% | $1000 minimum monthly deposit. On balances up to $250,000, over part the Base Rate of 0.05% p.a. applies |
| BoQ Bonus Interest Savings | 5.45% | Bonus interest is paid into your account when you limit your withdrawals to a maximum of one per month |
| CBA NetBank Saver | 2.35% | 2.40% p.a. fixed bonus margin for the first 5 months on your first NetBank Saver |
| CBA Goal Saver Account | 4.90% | At least 1 deposit required; balance at end of month must exceed balance at start of month. |
| Great Southern Bank | 4.30% | No bonus conditions |
| Heritage Online Saver | 3.45% | $1 or more, bonus intro rate 1.45% (promotional 4 month rate on new accounts up to $100,000) |
| ING Savings Accelerator | 4.70% | $150,000 and over |
| Macquarie CMA | 2.75% | Minimum $5,000 |
| ME Online Savings | 4.25% | Have both Online Savings Account and Everyday Transaction Account. On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 2.00% | Bonus rate 2.65% for the first four months when you open your first NAB iSaver account |
| NAB Reward Saver | 5.00% | make at least one deposit on or before the second last banking day of the month and no withdrawals during the month |
| Rabobank PremiumSaver | 5.35% | On balances to $250,000. Balance increased by $200 a month. |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals. |
| Suncorp Growth Saver | 5.05% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 5.00% | 5.5% on first $100,000, 5.0% on next $150,000; applies only on amounts upto $250,000. Minimum $500 deposit each month into Spend or Save accounts. |
| Up Savers Account | 4.35% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 1.10% | 4.25% p.a. for the first 5 months for new Westpac eSaver customers |
| Westpac Reward Saver | 5.00% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. Keep your account balance above $0 at all times. |