The Reserve Bank of Australia (RBA) has maintained its cash rate at 3.85% in its latest announcement. Despite this decision, major banks, including the ANZ, have begun reducing interest rates on savings accounts. Recently, ANZ decreased the interest on its Progress Saver account by 0.10 percentage points to 3.40%. This follows a trend observed over the past month, with other banks like NAB and Bendigo Bank also lowering their rates.
NAB, for instance, reduced its Reward Saver account rate by 0.05 percentage points to 4.35% as of June 20, whereas Bendigo Bank’s EasySaver account saw a dip of 0.10 percentage points to 3.05% on July 1. Canstar’s data insights director, Sally Tindall, emphasised that these cuts negatively impact savers, who make up the majority of the population, while the focus has largely remained on mortgage holders.
Despite the minor adjustments in percentages, Tindall noted that these reductions are frustrating for customers aiming to meet monthly conditions for better rates. Detailed analysis revealed only four banks presently offer savings rates at or above 5%: BOQ, Westpac, MOVE, and ING. However, should the RBA cut the cash rate next month, this may prompt even these higher rates to decline to around 4%.
NAB has also lowered term deposit rates by up to 0.20 percentage points, and ANZ cut its 8-month Advance Notice term deposit rate by 0.10%. Concurrently, Australia’s unemployment rate climbed to 4.3% in June from 4.1% the previous month, indicating a broader labour market weakness. Despite a rise in employment of 2,000 individuals, the overall number of people classified as unemployed increased by 33,600.
Economists across notable banks perceive these employment figures as supportive of a potential rate cut in August. Commonwealth Bank economist Belinda Allen stated that the data removes a hurdle for an RBA interest rate cut. AMP chief economist Shane Oliver similarly conveyed that the current statistics suggest an impending rate reduction by the RBA.
While forecasts vary among major banks regarding future rate cuts, they uniformly anticipate one in August. Specific predictions for subsequent rate cuts include:
- CBA: Two more cuts in August and November, lowering the cash rate to 3.35%.
- Westpac: Four cuts in August, November, February, and May, reducing the cash rate to 2.85%.
- NAB: Three cuts in August, November, and February, bringing the rate down to 3.10%.
- ANZ: Two cuts in August and November, targeting a similar 3.35% rate.
As discussions continue around the potential rate movements, market sentiment remains cautious. Observers are monitoring economic indicators closely, particularly the unemployment data, which could signal further adjustments in monetary policy ahead.
