Summary: Cash rate expectations path slightly flatter; cash rate now expected to average 3.215% in May 2023; several changes to surveyed ADI cash rates.
Expectations moved to reflect a slightly flatter 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 0.31% to 0.55% in June and then increase to 1.295% by August. November contracts implied a 2.275% cash rate while May 2023 contracts implied 3.215%. A week ago, the May 2023 contract’s price implied an average rate of 3.225%.
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 had the potential to affect domestic interest rate expectations were generally received favourably by economists.
The minutes of the RBA’s May board meeting were released on Tuesday. The main point of interest was the discussion regarding the size of the increase, with rises of 0.10%, 0.25% and 0.40% all under consideration.
Westpac and the Melbourne Institute released the April reading of their leading index a day later. The annualised growth rate remained in positive territory, signifying above-trend growth.
The March quarter wage price index report came out the same day. Wages grew by a little less than expected in aggregate but economists think the trend is up.
On Thursday, April’s Labour Force report undershot expectations in terms of additional jobs. The jobless rate remained unchanged at 3.9% after revisions and the participation rate slipped a little.
3 month BBSW is a useful benchmark for cash rates and it finished the week 7bps higher at 1.04%. The RBA’s target for the overnight lending rate between banks is 0.35% but actual overnight interbank loans are still being negotiated at 0.31%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were several changes made by deposit-taking institutions in our survey of cash account interest rates this week. UBank raised its USaver account rate by 5bps while Suncorp’s Growth Saver Account rate was increased by 15bps. Arab Bank’s Personal Online Savings Account, CBA’s NetBank Saver account and Westpac’s Life account all had their respective rates raised by 25bps each. UBank also raised its USaver Ultra account rate by 30bps.
| 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 | 0.40% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 0.75% | 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 | 0.30% | |
| CBA Goal Saver Account | 0.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 0.45% | 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 | 0.50% | 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 | 0.60% | |
| UBank USaver | 0.50% | Limit $200,000. Minimum $200 deposit per month. |
| UBank USaver Ultra | 0.10% | Limit $200,000. Minimum $200 deposit per month. |
| Up Saver Account | 1.35% | Calculated daily, paid monthly once qualfied |
| Volt Bank | 1.15% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.50% | Minimum $50 deposit and no withdrawal per month |