Term deposit rates yo-yo in shadow of RBA’s neutral stance; new market leaders emerge

Major bank economists believe the RBA is done hiking rates, with the easing cycle pegged to begin in September, as per CommBank and Westpac; or November, according to NAB and ANZ.

But after the Board voted to keep the cash rate at 4.35% at least until it meets again in May and leave the door very much open for anything, the markets are left balancing the Reserve Bank’s less-than-reassuring messaging and datasets that say it’s perhaps time to loosen the tightening bias. 

Albeit stickier than previously thought, the nation’s inflation rate has been tracking towards RBA’s target range after the latest monthly print revealed consumer prices were unchanged at 3.4% since December, undershooting the market estimate of 3.5%. 

“[Yesterday’s] inflation data carries less weight and immediate implications for monetary policy because of the RBA Board’s new meeting schedule,” CommBank economist Stephen Wu said.

“As we noted previously, the second month of each quarter brings about price updates on many market services that are unavailable in the first month.

“There was some further good news on the disinflation front here, albeit it was not evenly spread across all categories.”

The central bank will have access to a more robust Q1 consumer price index due on 24 April, days before the next RBA meeting on 6-7 May. 

To assuage the central bank’s worry about labour costs, the Productivity Commission (PC) revealed in its bulletin released today that productivity is returning to pre-pandemic normal. 

The March bulletin showed labour productivity increased by 0.5% in the December quarter, as hours worked fell by 0.3% while output increased by 0.2%. 

“For two quarters in a row, Australians produced more while working fewer hours. And while monthly labour force data is volatile, we can now say with a bit more confidence that the freefall in labour productivity that began in June 2022 has likely bottomed out,” PC deputy chair Alex Robson said.

Whether these data will deliver that widely forecast cash rate cuts and the subsequent drops in term deposit rates, only the RBA can tell. 

But while the Board refuses to signal anything concrete, term deposit providers are riding the tide – either delivering rate increases to entice customers or wielding the axe to avoid the risk of paying top rates come easing cycle. 

Rabobank emerges as new market leader for five-year term deposits

Rabobank now offers the top-rate for five-year term deposits following its adjustments this week. 

Per the InfoChoice database, Judo Bank led the five-year term deposit providers last week with a 4.85% p.a. offering. 

However, after applying a 19-basis-point increase, Rabobank’s 4.90% p.a. paid at maturity is currently the best rate for customers locking in a 60-month term deposit.  

Not to be outdone, Rabobank also hiked the rates on its three-, six-, and nine-month term deposits, moving them closer to current market-leading rates. 

“We have made some changes to our term deposit pricing to reflect movements in the yield curve which has resulted in increases to our 3-month, 6-month, 9-month and 5-year rates.,” Rabobank head of online savings Julie Blanchard told InfoChoice Group.

“We have also adjusted some of our at-call variable products following significant changes across the market and further holds from the Reserve Bank of Australia,” Ms Blanchard added.

The agribusiness-focused bank founded in the Netherlands currently offers one of Australia’s highest savings account introductory rates at 5.75%.  

Great Southern Bank boosts rates by up to 70 bps

Great Southern Bank joins Gateway Bank in offering the current top rate rate on three-month term deposits after boosting its offering by 70 basis points this week.

The customer-owned bank offers customers 4.90% p.a. on a three-month TD, paid at the end of the term. Depositors who prefer to be paid monthly get 4.80% p.a. 

Following this week’s movements, Great Southern Bank’s nine-month and one-year term deposits are now only 5 and 10 bps behind the current top rates.

BCU Bank adjusts term deposit rates 

BCU Bank slashed its seven- to nine-month and one-year term deposit rates by up to 70 basis points, while simultaneously boosting its six-month rate by 20 bps. 

The minimum deposit is $1,000 while the maximum is $100,000. The newly adjusted rates are payable at the end of term.

The Mac moves rates down

The Mac Credit Union slashed 20 bps to equalise its six- and nine-month term deposits, which both offer 3.80% p.a. interest rate paid at maturity. 

A uniform 30-basis-point cut was also applied across its one-year deposit products, leaving rates at 4.50% p.a. whether it’s paid monthly, quarterly, or annually. 

Challenger Bank joins 6-month term deposit leaders

Challenger Bank joins Gateway on the podium for the six-month term deposit top rate, after a 5 bps hike brought the online bank’s rate to 5.15% p.a. 

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Read more: Term Deposit News RBA

Bernadette Lunas

Finance Journalist

Bernadette is a journalist with years of experience covering topics in macroeconomics, real estate, and lifestyle beats for notable print media organisations. She joined the InfoChoice Group in 2024, bringing her passion for writing stories that help Australians make better decisions about money.

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