Summary: Cash rate expectations over next 12 months move substantially lower; cash rate now expected to average 3.685% in August 2025; 3-month BBSW down 8bps; no changes to surveyed ADI cash rates.
Expectations moved this week in a manner which suggested the path of the cash rate over the next twelve months will be substantially lower in comparison with its expected path at the end of the previous week. Contracts at the end of the week implied the cash rate is expected to remain reasonably close to the current rate in the short-term, with an average of 4.33% expected through August, 4.32% in September and 4.255% in November. However, February 2025 contracts implied 4.09% and August 2025 contracts implied 3.685%, 65bps below the current rate.
The RBA did not enforce its cash rate target by completely draining excess liquidity from the banking system between March 2020 and mid-2024. As a result, the actual cash rate has been several basis points below the target rate until recently. Contract prices reflect expectations of the average actual cash rate in a given month, not the target rate, although the former is obviously related to the latter.
June dwelling approval numbers came out on Tuesday. Total approvals by number fell by 6.5% over the month and were 3.7% lower over the past year. Approvals for houses and apartments both decreased.
June Consumer Price Indices were released the next day. The index rose by 1.0% over the quarter, in line with expectations, taking the annual rate from 3.6% to 3.8%. However, the RBA’s preferred measure of inflation increased by less than expected and its annual growth rate slowed from 4.0% to 3.9%.
June private credit and June retail sales were released that same morning. Total private credit increased by 0.6%, above expectations, while the annual growth rate accelerated from 5.2% in May to 5.6%. Retail spending increased by 0.5% compared to the previous month. Sales were up 2.9% on a 12-month basis, below the inflation rate.
Preliminary goods trade figures for June were released on Thursday. They indicated Australia’s trade surplus in goods increased from $5.1 billion after revisions in May to $6.0 billion. Good exports increased by 1.7% to $43.8 billion and imports increased by 0.5% to $38.2 billion.
June home loan approval numbers were released at the end of the week. Total approvals excluding refinancing increased by 1.3% in dollar terms over the month and by 19.1% over the year. The number of loan commitments to owner-occupiers declined by 0.5%.
June quarter producer price indices were released at the same time. The PPI rose by 1.0% over the quarter and by 4.8% on an annual basis, up from 4.3% in the March quarter.
~~~~
3-month BBSW is a useful benchmark for cash rates and it finished the week 8bps lower at 4.41%. The RBA’s target for the overnight lending rate between banks is 4.35% but actual overnight interbank loans are being negotiated at 4.34%, 1bp below the target but 9bps 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.
CASH ACCOUNTS
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 5.40% | Min. monthly $1,000 dep. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 4.25% | 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 | 1.00% | On balances of $250,000 to $499,999 |
| Bankwest Smart eSaver | 2.45% | On balances up to $500,000.99 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 | 2.75% | 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 | 4.20% | 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 | 5.45% | 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 | 5.20% | On a combined balance of up to $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. |