Big banks alter term deposit rates ahead of RBA cash rate update

NAB and ANZ were the Big Four cohorts to lead this week's movements, marked with a couple of hikes and a few drops in term deposit rates as the market awaits RBA's next move amid pretty choppy datasets.

As Australia's economy ground to a halt amid weak GDP growth, economists are all the more convinced that the RBA Board will keep the cash rate unchanged for the fifth time when it convenes on 17-18 June.

"The economy remained weak [in Q1 2024] and would likely be unable to survive another interest rate hike," RSM Australia economist Devika Shivadekar said.

Key drags on the economy, she said, are consumers who have entered hibernation and pulled back on spending until the outlook brightens.

"The RBA's highly aggressive rate hiking cycle has clearly worked to slow demand growth in the economy," CBA head of Australian economics Gareth Aird noted.

"Rising mortgage payments along with a lift in tax payable and the effects of elevated inflation have weighed on household purchasing power."

However, the March quarter national accounts revealed a growing divide between essential and discretionary components of the economy, complicating RBA's policy manoeuvres.

While discretionary inflation (as in non-essentials like holidays and clothing) has fallen within RBA's target range, essential inflation (as in vital goods and services like groceries and housing) remains high.

Discretionary spending rose 0.1% while spending on essential items climbed to 2.1%.

Inflation in turn remains on the upper range of target, currently sitting at 3.6% after accelerating by 1% in the March quarter.

"When responding to pressures on disposable incomes or incentives to save rather than spend, households tend to move from the most discretionary to least discretionary when deciding where to adjust their spending," Westpac economist Jameson Coombs said.

Experts believe if essential inflation won't shift inside the RBA's 2-3% band, discretionary inflation must be even lower to offset non-discretionary spending.

As it stands, available datasets are cloudy at best - we've got a weak economy in per-capita recession on one hand and sticky inflation on the other - resulting in the current seesaw of interest rates.

This means you can either take advantage of the current term deposit rates - where you've got a few in the 5% range - before the widely anticipated rate cut in November or gamble and wait for possible rate increases.

NAB hikes one-year term deposit rates

NAB hikes its range of one-year term deposits by a uniform 10 basis points, further increasing its lead from its Big Four peers.

The big bank's term deposit paying returns at the end of term now carries 4.80% p.a. interest, and trends lower as the payment frequency increases.

Prior to these adjustments, NAB has already been leading among the four majors in the one-year TD space.

This week puts NAB 20 basis points ahead of the second rate offered by ANZ - only 10 had ANZ did not adjust its rates, too (see below).

CommBank also offers 4.60% p.a. on one-year terms like ANZ but for a much higher deposit, starting at $50,000.

For a $5,000 deposit, CommBank customers get a slightly lower 4.55% p.a.

Westpac's one-year TD currently offers the lowest among the four, paying 4.25% p.a. returns at the end of term.

ANZ varies term deposits

Rates were generally dropped across ANZ's Advance Notice term deposit products, save for a major boost applied to its 11-month TDs.

Following a 70 basis point increase, the 11-month term deposit currently carries the bank's top rate at 4.80% p.a. paid at maturity.

Meanwhile, other mid-term deposits - from six to 12 months - got as much as a 20 basis point cut.

ANZ's Advance Notice term deposits offer higher interest rates compared to the its standard term deposit products.

For instance, the bank's standard TD on 11-month terms only pays 0.10% p.a., a staggering 470 basis points lower than the rate offered through Advance Notice.

In exchange for higher rates, customers are required to give at least 31 days' notice if they want to withdraw their money.

A minimum deposit of $5,000 applies, and the maximum is $2 million.

BoQ breaches the 5% rate threshold

Bank of Queensland (BoQ) has broken into the 5% p.a. space, the third of the 10 biggest banks in Australia (in total assets) to do so.

BoQ hiked the rates on its 2-, 4-, 6-, and 12-month term deposits, with the 4-month term getting the biggest lift of 30 basis points.

Carrying the bank's highest rate is its one-year TD, paying 5.05% p.a. at maturity.

BoQ now offers the highest rate on one-year terms among the top 10 largest banks.

By comparison, both ING and HSBC offer 5.00% p.a. for the same product.

However, the Bank of Queensland is still 25 basis points behind the current market-leading rate offered by Great Southern Bank.

The bank also appears to be enticing depositors in the 6-month space, offering 5.00% p.a. returns once the term ends.

BoQ's 6-month TD rate is a touch below its top 10-peer ING's 5.05% p.a. and 25 basis points behind current leaders Gateway Bank and Judo Bank.

Australian Military Bank also joins the '5% club'

The member-owned bank that primarily serves the Australian Defence Force entered the 5% p.a. race this week, following a 160 basis point boost to its 4- to 5-month term deposits.

Australian Military Bank's Investment Plus term deposit offers a 5.10% p.a. interest rate payable at maturity.

Income Plus term deposit, whose returns are paid monthly, now carries a 5.00% p.a. rate.

Both Investment Plus and Income Plus require a minimum of $1,000 deposit.

Bank of Sydney moves down from the top

Bank of Sydney relinquished its title as the market leader in the 6-month term deposit space (tied with Judo and Gateway Bank) after dropping its rates this week.

The bank now settles in the second spot, along with Great Southern Bank and G&C Mutual Bank, offering 5.20% p.a. interest on 6-month terms.

It also transferred the top-rate status for 9-month terms to the then-second Great Southern Bank, following this week's rate adjustments.

From offering the second-highest rate on one-year terms, Bank of Sydney has moved down to the fourth-best rate at 5.15% p.a., similar to Gateway Bank.

Here are the new rates the bank offers on term deposits paying interest at maturity.

The minimum deposit is $1,000, and the maximum is $1 million.

Other movers this week

• MyState Bank gave both its regular and online 5-month term deposits a big 70 basis point boost to bring their rates to 5.10% p.a.
• If BoQ moves, ME Bank follows, and this week the bank also upped the rates on its 4-month term deposits by 30 basis points to 4.95% p.a. (paying interest at maturity) and 4.90% p.a. (paying interest monthly)

Read more: Term Deposit News RBA Big 4 Term deposit rate changes

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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