Term deposits, particularly those on shorter terms, have broadly trended higher recently amid expectations the Reserve Bank of Australia (RBA) will keep the cash rate at its current level until at least the third quarter of the year.
However, with consumer prices rising faster than expected, punters believe this might be further delayed
Australia’s headline inflation rate accelerated by 1% in the March quarter, bringing the annual pace to 3.6%.
The latest read overshot market expectations of a 0.8% quarterly price lift, and 3.5% annually.
The trimmed mean measure, the RBA’s inflation gauge, also came in stronger than expected at 4%; the central bank’s forecast was for the annualised rate to land at 3.8%.
In light of the March quarter print, CBA and Westpac, both of which had pencilled in a September start for rate cuts, have now pushed back their forecasts.
Westpac chief economist and former RBA Assistant Governor Luci Ellis now expects the Board to deliver the first rate cut in November “given the slower progress of disinflation this quarter”.
“[Inflation] is declining, but it has a way to go for the RBA to be confident of returning to the 2-3% target rate on the desired timetable,” she said.
The Reserve Bank aims to hit the midpoint of its target band by the end of 2025.
CBA economist Stephen Wu likewise revised the rate cut call of Australia’s largest bank following the data release on Wednesday.
“The stronger‑than‑expected CPI print, higher than both our and the RBA’s implied profile, as well as the gradual loosening in the labour market thus far, suggests the risk now sits with a later start date to the first rate cut,” he said.
With the benchmark rate expected to remain at its current peak for a bit longer, savers likely have more time to maximise their returns by locking away their funds in term deposits whose rates now north of 5% p.a.
AMP Bank amplifies rates again
Sydney-based AMP Bank boosted its term deposits for the second week, bringing its products one year and shorter over the 5% p.a. threshold.
The bank’s top rate, 5.05% p.a. paid at maturity, is offered to customers of six, nine, and 12-month products with deposits starting at $25,000.
Just a month ago, those term deposits were hovering between 4.75% p.a. and 4.80% p.a. Two hikes later, and we’re here:
|
Term length |
Change |
New rate |
Deposit size |
|
Six months |
+10 bps |
5.05% p.a. |
$25k-$10m |
|
Nine months |
+15 bps |
5.05% p.a. |
$25k-$10m |
|
One year |
+15 bps |
5.05% p.a. |
$25k-$10m |
Customers seeking the same terms but with smaller deposits – $5,000 to $25,000 – are not left behind, as AMP applied the same basis point boosts to bring their rates to 5.00% p.a.
The bank’s biggest adjustment was made for its range of two-year term deposits, increasing by 60 basis points to bring the rates between 4.55% p.a. to 4.80% p.a.
Arab Bank changes tack, moves rates up
Following a series of rate cuts across its term deposit products, Arab Bank changes course, moving the rates on its six and nine-month terms north.
The bank’s six-month term deposit joins the company of those offered by Judo and Bank of Sydney, after a 15 basis point boost brought its rate to 5.10% p.a. payable at the end of term.
However, unlike its peers offering the rate for a smaller deposit of $1,000, Arab Bank’s top rate is available for deposits starting at $10,000 and topping at $500,000.
Nine-month terms, on the other hand, offer 5.05% p.a. returns.
Customers looking to lock funds no more than $10,000 are offered 4.60% p.a. on a six-month term and 4.55% p.a. for nine months.
|
Term length |
Change |
New rate |
Deposit size |
|
Six months |
+15 bps |
4.60% p.a. |
$1-$10,000 |
|
Nine months |
+45 bps |
4.55% p.a. |
$1-$10,000 |
|
Six months |
+15 bps |
5.10% p.a. |
$10,000-$500,000 |
|
Nine months |
+45 bps |
5.05% p.a. |
$10,000-$500,000 |
MyState Bank hikes 7-month term deposit rates
Tassie bank MyState made the biggest move this week, boosting the rate on its seven-month term deposit by 150 basis points to bring it to 5.00% p.a.
Do note however that the offer is only available until 3 May.
The minimum deposit is $5,000 – the maximum is $100m – and interest is payable at the end of term.
Other movers this week
- Regional Australia Bank lowers rates by up to 15 basis points.
- Hume Bank hikes three-month term deposit by 25 basis points and cuts 100-day TD by 10 basis points.
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