To cope with the greatest inflation in two decades, a deteriorating cost-of-living issue, and a double-digit increase in transportation costs, savers need acceptable bank account interest rates.
Consumers of all ages can get a generous rate on bonus accounts if they are willing to lock up their money for at least six months and not touch it. Young savers under 35 can get good deals on bonus accounts, while consumers of all ages can get a generous rate if they are willing to lock up their money for at least six months and not touch it.
That is, assuming customers have enough savings left over when everyday prices rise, particularly transportation costs, which are increasing at a double-digit rate.
Families in Australia spend $1,770 a week on necessities, with transportation expenses increasing by 12.9% in the last year, more than doubling the already high inflation rate.
Then there are interest rate hikes to combat the highest inflation since 2001, as global supply chain issues drive up daily prices.
On Tuesday, the Reserve Bank of Australia lifted the cash rate by 0.5 percentage points, the first such hike since February 2000.
On Wednesday, the Commonwealth Bank became the second major bank to announce that it would raise variable house loan rates for both owner-occupiers and investors from June 17, matching the RBA’s half-percentage-point hike.
Westpac was the first large bank to match the Reserve Bank of Australia’s 50 basis point rise on variable loans on Tuesday, with the changes taking effect on June 21.
However, it also announced a new 12-month term deposit rate of 2.25 percent, which is the best among the big four banks, effective June 9.
Savers, on the other hand, are unable to withdraw their funds, which means that someone with a $10,000 term deposit will have to wait a year to earn $225 in interest.
ANZ became the third major bank to boost variable mortgage rates, starting June 17, on Wednesday afternoon.
ANZ has also stated that it will match Westpac’s 2.25 percent term deposit rate for 11 months, starting June 13.
Consumers who want access to their money while earning a respectable interest rate should look for a better bonus saver program outside of the main banks.
Bonus saving customers should not expect to be rewarded, according to RateCity research director Sally Tindall, as the RBA continues to raise rates to combat rising inflation.
‘Savers expecting a substantial benefit from the RBA hike shouldn’t hold their breath,’ she cautioned.
Consumers have $1.27 trillion in bank deposits, despite the fact that last year’s lockdowns prevented people from spending, according to Australian Prudential Regulation Authority data for April.
‘Many banks are hesitant to raise savings rates significantly until Australians start spending some of the record amount of cash they have stored away,’ Ms Tindall said.
With inflation reaching 5.1 percent, the highest in two decades, Australians need all the aid they can get to deal with the rising cost of living.
Affordability crisis
Following Russia’s invasion of Ukraine, gasoline prices have risen to more than $2 per litre, resulting in a 12.9% increase in transportation expenditures over the past year.
According to a CommSec analysis of Australian Bureau of Statistics household expenditure data from the March quarter, Australian families spent $1,770.95 a week on necessities.
The annual increase of 5.1 percent, in line with inflation, meant that Australian households’ weekly expenses increased by $85.76.
The cost of transportation increased by $22.67 per week to $198.76, a 12.9 percent increase that was more than double inflation.
Housing expenditures increased 6.4 percent, or $23.68 per week, to $390.81 due to tight rental vacancy rates and rising house prices.
According to Craig James, chief economist of CommSec, the pandemic had a significant impact on household finances.
‘Notably, Covid’s spending patterns have clearly shifted during the last two years,’ he added.
Weekly food and non-alcoholic beverage prices have risen by $11.90, or 4.3 percent, to $289.27 in the last year.
To earn a greater interest rate on a term deposit, savers must leave their money untouched for a set length of time.
Westpac’s new 12-month term deposit rate of 2.25 percent is the best among the major banks.
It’s also for a two-year period.
The Commonwealth Bank offers a 2.25 percent 18-month term deposit rate, compared to NAB’s 2% five-year rate and ANZ’s pitiful 0.2 percent one-to-five-year rate.
Better 12-month term deposit rates of 2.9 percent are available from AMP and Firstmac, with interest paid at the end of the year.
A saver with a $10,000 account will earn $290 in interest.
AMP Bank has a 12-month rate of 2.8 percent per year, with interest paid quarterly or every three months.
For those who lock their money away for two years with interest paid annually, AMP offers an even better 3.65% term deposit rate, worth $730.
Even the best term deposit, such as AMP’s 4.15 percent for a longer five-year term deposit, does not keep up with inflation.
It offers 3.65% for two years, with interest paid on a yearly basis.
For a six-month term deposit, Gateway Bank and Firstmac both offer 2.2 percent.
Savers with a bonus
The main banks are stingy with their bonus savings accounts, which allow customers to access their money while earning a respectable interest rate if they deposit a certain amount each month.
To get around this, savers can explore for opportunities outside of the major four.
Virgin Money Boost Saver pays 1.6 percent, while Great Southern Goal Saver pays 1.4 percent and ING Savings Maximiser, AMP Bank Saver Account, and UBank Save Account pay 1.35 percent.