Summary:
Despite the RBA opting to hold the cash rate steady at 4.10% last Tuesday,a handful of banks proceeded to drop their rates further. Currently, no term deposit provider is offering returns starting with a ‘5’, with the top rate sitting at 4.95% p.a
Given what is almost universally perceived as an extremely high likelihood of a cut in the next RBA meeting in May,we could see these top rates fall even further.
We note that the market has increased 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%. They had ascribed a chance of about 70% 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. Effectively, the market is pricing a global recession risk.
Governor Michelle Bullock struck a more cautious tone.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 might be more reluctant to cut than many think, pointing to global uncertainties.
Let’s check the latest market movements over the last weeks.
- Westpac drops term deposit rates.Westpac has made a flurry of cuts across its range of term deposit products, slashing some terms by as much as 25 basis points. The bank’s headline rate for unconditional term deposits is now offered through its 12-month term at 3.90% p.a., paid at maturity. Prior to this week’s changes, the same product paid an interest rate of 4.00% p.a. Westpac’s highest term deposit rate remains available through its 11-month ‘special offer’ for existing customers, which pays 4.60% p.a. when opened or renewed online.
- BankSA, Bank of Melbourne, St.George follow Westpac’s moves.Westpac’s subsidiaries – BankSA, Bank of Melbourne, and St.George – moved in lockstep with the parent bank, reducing term deposit rates by up to 25 basis points. The term deposit products offered by these banks are largely identical to Westpac’s. However, a key difference is that customers can open an account with as little as $2,000.
- Macquarie Bank cuts term deposit rates.Australia’s fifth-largest bank is back on the rate-cutting board, trimming returns on its 9- and 12-month term deposits. In typical Macquarie fashion, 5 basis points were shaved from the 9- and 12-month terms
- Suncorp Bank adjusts term deposit rates. Suncorp appears to have flipped the script on its 6- and 7-month term deposits – hiking the former by up to 110 basis points and simultaneously slashing the latter by up to 100 basis points. Following these changes, depositors can now earn up to 4.70% p.a. by locking their funds in a 6-month term deposit. In contrast, the longer 7-month option now returns as little as 3.70% p.a.
- HSBC moves term deposit rates down.HSBC joined the rate-cutting action this week, reducing the interest rates on its short- to medium-term term deposit products. Up to 25 basis points were shaved off select term deposits, bringing some rates down to the 4.00% p.a. mark. For example, HSBC’s 6-month term deposit now pays 3.90% p.a. at maturity, down 25 basis points from last week’s 4.15% p.a. offering. Meanwhile, the shorter 3-month term deposit pays 4.00% p.a., also down 25 basis points from 4.25% p.a.
Other rate movers
- Teachers Mutual Bank and UniBank cut term deposit rates up to 25 bps.
- Community First Bank slashes term deposit rates by up to 30 bps; introduces a 6-mo special rate at 4.80% p.a.
Term Deposit Rates by Institution
| Institution | 1 m nom | 2 m nom | 3 m nom | 4 m nom | 5 m nom | 6 m nom | 9 m nom | 1 Year | 2 Year | 3 Year | 4 Year | 5 Year |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ANZ | 1.25 | 1.45 | 3.00 | 3.15 | 3.25 | 3.40 | 3.60 | 4.00 | 3.75 | 3.10 | 3.10 | 3.10 |
| Commonwealth Bank | 1.25 | 1.50 | 3.00 | 3.15 | 3.25 | 3.30 | 3.60 | 3.60 | 3.75 | 3.50 | 3.50 | 3.50 |
| NAB | 1.25 | 1.45 | 3.00 | 3.15 | 3.25 | 3.40 | 3.60 | 4.00 | 3.80 | 2.90 | 2.90 | 2.90 |
| Westpac | 1.25 | 1.45 | 2.90 | 3.05 | 3.15 | 3.30 | 3.50 | 3.90 | 3.65 | 3.15 | 3.15 | 3.15 |
| Military Bank | 3.50 | 3.50 | 3.50 | 4.30 | 4.30 | 4.65 | 4.50 | 4.60 | ||||
| AMP Bank | 0.10 | 0.20 | 4.60 | 4.45 | 4.45 | 4.50 | 4.40 | 4.35 | 4.00 | 3.00 | 3.00 | 3.00 |
| Arab Bank Australia | 1.25 | 1.25 | 4.15 | 4.00 | 4.00 | 4.70 | 4.40 | 4.20 | 3.75 | 3.65 | 3.65 | 3.55 |
| Bank of Melbourne | 1.25 | 1.45 | 3.00 | 3.15 | 3.25 | 3.40 | 3.75 | 4.00 | 3.30 | 3.30 | 3.30 | 3.30 |
| Bank Australia | 4.45 | 4.70 | 4.55 | 4.45 | 4.25 | 4.00 | ||||||
| BankSA | 1.25 | 1.45 | 2.90 | 3.05 | 3.15 | 3.25 | 3.45 | 3.85 | 3.85 | 3.00 | 3.00 | 3.00 |
| Bankwest | 2.00 | 2.00 | 3.75 | 3.00 | 4.75 | 4.25 | 4.00 | 4.50 | 3.90 | 3.80 | 3.80 | 3.80 |
| Bank of Sydney | 1.25 | 1.50 | 3.25 | 4.80 | 3.50 | 3.50 | 3.70 | 4.00 | ||||
| BankVic | 3.60 | 4.00 | 3.70 | 4.70 | 3.70 | 4.50 | 4.00 | 4.00 | 4.00 | 4.00 | ||
| Beyond Bank | 4.55 | 4.40 | 4.25 | 4.20 | 3.70 | 3.60 | 3.60 | 3.60 | ||||
| Bendigo Bank | 1.25 | 1.50 | 3.20 | 3.70 | 3.80 | 4.10 | 4.20 | 4.00 | 3.25 | 3.30 | 3.30 | 3.30 |
| BOQ | 0.75 | 0.80 | 2.25 | 4.55 | 1.25 | 4.65 | 4.60 | 4.50 | 4.50 | 3.30 | 3.30 | |
| BOQ Specialist | 4.60 | 4.65 | 4.75 | 4.70 | 4.50 | 4.30 | 3.50 | 3.50 | 3.50 | |||
| Great Southern Bank | 1.30 | 1.60 | 4.50 | 4.80 | 4.50 | 4.70 | 4.40 | 4.40 | 3.80 | 3.60 | 3.60 | 3.60 |
| Defence Bank | 4.00 | 3.60 | 3.70 | 4.20 | 4.00 | |||||||
| Greater Bank | 1.00 | 1.00 | 4.00 | 4.00 | 4.00 | 4.65 | 4.00 | 4.45 | 4.00 | 4.00 | 4.00 | 4.00 |
| Heritage Bank | 1.25 | 1.50 | 3.95 | 4.65 | 3.60 | 4.45 | 4.35 | 4.25 | 4.10 | 3.90 | 3.90 | 3.90 |
| Horizon Credit Union | 1.25 | 1.50 | 3.70 | 3.70 | 4.10 | 4.50 | 4.30 | 3.70 | 3.60 | |||
| HSBC | 1.85 | 2.00 | 4.25 | 3.50 | 3.50 | 4.15 | 4.15 | 4.15 | 4.00 | 4.00 | 4.00 | 4.00 |
| IMB | 4.20 | 4.65 | 4.25 | 4.00 | 4.00 | 4.00 | 4.00 | |||||
| ING Direct | 4.35 | 4.35 | 4.40 | 4.45 | 4.30 | 3.90 | ||||||
| in1bank | 3.85 | 3.90 | 4.45 | 4.40 | 4.30 | 4.25 | 4.10 | 3.95 | 3.85 | |||
| Judo Bank | 4.75 | 4.90 | 4.85 | 4.75 | 4.55 | 4.45 | 4.55 | 4.55 | ||||
| Macquarie Bank | 2.10 | 2.10 | 4.55 | 4.50 | 4.45 | 4.30 | 4.25 | 3.90 | 3.80 | 3.80 | 3.80 | |
| ME Bank | 0.75 | 0.80 | 2.25 | 4.55 | 4.65 | 4.75 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 |
| MyState Bank | 0.50 | 0.50 | 4.00 | 4.20 | 4.60 | 4.75 | 4.60 | 4.55 | 3.95 | |||
| Newcastle Permanent | 1.00 | 1.00 | 4.00 | 4.00 | 4.00 | 4.65 | 4.00 | 4.45 | 4.00 | 4.00 | 4.00 | 4.00 |
| People's Choice Credit Union | 1.50 | 3.95 | 4.65 | 3.60 | 4.45 | 4.35 | 4.25 | 4.10 | 3.90 | 3.90 | 3.90 | |
| Police Bank | 4.10 | 3.75 | 3.00 | 4.25 | 4.50 | 4.45 | ||||||
| P&N Bank | 1.60 | 4.00 | 4.00 | 4.65 | 4.45 | 4.30 | 3.60 | 3.60 | 3.55 | 3.55 | 3.55 | |
| RACQ Bank | 0.55 | 1.60 | 4.85 | 3.50 | 3.50 | 4.65 | 4.40 | 4.40 | 3.90 | 3.50 | 3.50 | 3.50 |
| Rabobank Australia | 2.00 | 2.10 | 4.55 | 4.00 | 4.00 | 4.40 | 4.30 | 4.30 | 4.10 | 4.20 | 4.50 | 4.65 |
| Rural Bank Limited | 1.25 | 1.50 | 3.20 | 3.70 | 3.80 | 4.10 | 4.20 | 4.00 | 3.30 | 3.25 | 3.30 | 3.30 |
| St.George Bank - Except VIC | 1.25 | 1.45 | 3.00 | 3.15 | 3.25 | 3.40 | 3.60 | 4.00 | 3.30 | 3.30 | 3.30 | 3.30 |
| Suncorp Bank | 1.30 | 1.90 | 3.95 | 4.55 | 3.45 | 4.70 | 4.25 | 4.30 | 3.75 | 3.75 | 3.75 | 3.75 |
| Teachers Mutual Bank | 4.55 | 4.30 | 4.35 | 4.50 | 4.45 | 4.35 | 3.90 | 3.90 | ||||
| The Capricornian | 3.00 | 3.25 | 4.00 | 4.00 | ||||||||
| Bank First | 0.75 | 1.00 | 4.45 | 4.45 | 4.60 | 4.45 | 4.40 | 4.00 | 3.80 | 3.80 | 3.80 |