Summary: Cash rate expectations path significantly flatter through 2022, first half 2023; cash rate now expected to average 3.735% in May 2023; three increases to surveyed ADI cash rates.
Expectations moved to reflect a significantly 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 0.81% to 1.18% in July and then increase to 1.675% by August. November contracts implied a 2.815% cash rate while May 2023 contracts implied 3.735%. A week ago, the May 2023 contract’s price implied an average rate of 4.37%.
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 restricted to a couple of items.
One of them were the minutes of the RBA Board’s June meeting which were released on Tuesday. While there was nothing to surprise markets, the minutes did provide some understanding of the Board’s thinking with respect to the absolute level of the cash rate as well as Australia’s recent sources of inflation.
Westpac and the Melbourne Institute released the May reading of their leading index a day later. The annualised growth rate fell again but remained in positive territory, signifying above-trend growth.
3-month BBSW is a useful benchmark for cash rates and it finished the week 6bps lower at 1.74%. The RBA’s target for the overnight lending rate between banks is 0.85% but actual overnight interbank loans are still being negotiated at 0.81%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were three rate increases made by deposit-taking institutions in our survey of cash account interest rates this week. NAB raised its iSaver rate by 25bps but also trimmed its Reward Saver account rate by 5bps. Westpac raised its Westpac Life account by 35bps.
| 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 | 0.50% | 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 | 0.25% | 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 | 0.70% | 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 | 0.15% | On balances from $200 - $500,000. Minimum $200 deposit and no withdrawal per month |
| Suncorp Growth Saver | 1.30% | |
| 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 | 1.85% | Calculated daily, paid monthly once qualfied |
| Volt Bank | 1.65% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.85% | Minimum $50 deposit and no withdrawal per month |