Savers slaughtered as deposit rates crater

Data from RateCity shows that banks have slashed deposit rates since the RBA’s latest interest rate cut, with the average ongoing savings rate across the banking system now just 0.46%:

According to RateCity, 30 banks have taken a knife to interest rates since the RBA cut, with the average ongoing savings rate across the banking sector now sitting at 0.46 per cent.

Westpac is advertising the highest conditional savings rate out of the big four at 0.75 per cent, while Commonwealth Bank is offering the lowest at 0.45 per cent.

Both Westpac and NAB are advertising the highest introductory rates on standard deposit accounts at 0.75 per cent.

Ms Tindall said it was only a matter of time before NAB and Westpac were forced to drop rates.

“It’s not easy operating in a low-rate environment where profit margins are feeling the squeeze, but there aren’t many winners on the back of this month’s rate cut,” Ms Tindall said. “Savings rates are under fire”…

The below charts, which use aggregate deposit data from the RBA, illustrates the compression of deposit rates across various terms:

It sure does suck to be a saver right now.

Unconventional Economist
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  1. Where to put money tho?

    Overpriced dow or asx?

    We r building high end bris property 6km from city elite suburb

  2. Goldstandard1MEMBER

    Younger savers (ie. not retirees) particularly slaughtered as asset prices are being stoked and being in debt to the eye-balls was just made smart (short term) by the gov and RBA.

    • Yep…the inter-generational wealth transfer scheme just found another angle…

      Hence, why I started modestly ‘saving’ (wish I could do more) for my young son in diverse shares a few years ago, and I will continue to do so.

    • Yeah try saving for a f’ing house deposit!!! Just look at those TD rates pre GFC, omfg soooo jealous. So in July I had 41K in my first home saver account and I got $36 that month in bonus interest. Last month I had just under 40K (took 6K out to top up on PMs) and I got $23 in bonus interest. Just super wow hey? My deposit will be growing SO MUCH FROM INTEREST aren’t I a lucky girl? The current base rate is 0.05% and the bonus interest rate is 0.65%. There’s no way interest earned can play any sort of meaningful role in assisting in saving for a deposit, even if it takes you 5+ years of saving. Which would not have been the case in the 80s when my parents first bought a house. It sucks so much when you think about it.

      • Jumping jack flash

        “Yeah try saving for a f’ing house deposit!!!”

        This is why I advocate and beseech our glorious masters to do something very soon about that archaic requirement of the 5% ponzi buy-in fee.

        In 2050 when medians are around 10 million, the aspiring and hopeful young FHBer will need to come up with a cool 500K. At MINIMUM, unless we get some serious inflation from this can-kick, or they introduce 99.9% LVR loans.

      • These sound like great returns!

        Spoke to a guy last week fuming because they only got $25 on a 500k amount. Don’t think the bank cared if he took it out.

    • RobotSenseiMEMBER

      I stuck a fraction of my house deposit in crypto over the last fortnight.

      Up 25% in that time.

      Guess I found my new savings account.

      • Goldstandard1MEMBER

        I am actually happy for you, but you can see how if we all did this it would be risky en mass

        • RobotSenseiMEMBER

          Oh yeah. I have an exit point in mind where I liquidate everything and treat it like I do at the casino on a hot table; thanks for the gainz, I’m going home before I do something stupid. But holding hundreds of thousands in the bank right now just seems like slowdeath. I have <5% in crypto and have a grand total of 0 plans to increase that holding.

          But I know there'd be a few people who'd go full r/wallstbets. Then the party would really kick off.

  3. So this is the bit which changes everything:

    1. Most people have a mortgage interest rate under 4% (and many are sub 3% now).
    2. Yields on even the most basic shares in monopoly industries (i.e. AusNet, Telstra, Rio, BHP, Transurban, etc.) are all well over 4% and some are as high as 7%.
    3. Based on the dividend yields (let alone the potential for capital growth) it actually makes more sense to invest in blue chip shares for the dividends alone, than pay down your home loan early.
    4. If you even wanted to be riskier – you could redraw off your homeloan, invest in blue chips when cheap (i.e. like Telstra and Sydney Airport were recently) and end up being 4-5% per annum ahead.

    This is why shares are going to keep booming over the next little while – because the dividends alone are that lucrative and more than easily cover the home loan interest if people can redraw.

    Am I wrong?

    Regards – ADV

    • Poochie the Rockin DogMEMBER

      No I think your right – shares will provide better returns than property from here on out, house prices are still limited by wages whereas stock prices have no limits

  4. Its an absolute destruction of wealth. As the interest rate is lower than inflation, savers are effectively getting negative interest rates and losing purchasing power over time.

    • It’s only a destruction of wealth if you choose for it to be.

      As per my post above – leaving cash in the bank is a race to the bottom. You are much better off to park the cash in blue chip shares and ride the dividends and capital growth than have money effectively being discounted by the FIAT system doing nothing.

      We can complain about it all we want – but many are better just adapting to the new system and making what they can for themselves.

    • Just Thinking the same thing. Gold has made 20% PA for past 2yrs, even if it makes just 5% this year, I’m still 10x better off than in cash

  5. A large proportion of shares I look at have substantial holdings to ‘Vanguard Group’ and ‘Blackrock Group’. These are American Firms who predominately have a lot of money invested in many of Australias Major Shares. Im thinking if ever something bad happened to Wall Street and Americans started pulling that capital back out of Australia, the ASX could see prices fall pretty suddenly.

    • Nothng bad wil happen to wall street. They own the money printer, just look at what has happened this year.

  6. “It sure does suck to be a saver right now.”

    If you are still just saving money at this point, you are a sucker. Just have what you need in the bank for regular spending and emergencies, along with a credit card that has a low amount of debt on it and put the rest somewhere else.

    • Somewhere else? Where would you suggest? For most people the house is the only option as they are too nervous with the stock market.

      • Really does depend on amount of cash at hand, your risk appetite, investment timeframe and if you are willing to lose it all.

        Cash is out. So gold/silver for a longer term, plus potential currency hedge. Housing. Dividend paying AU stocks. US shares. Emerging markets. Options. Futures. Roulette. Crypto.

        To me, the list is endless. So the right question to be asking yourself is not “Somewhere else? Where would you suggest?”, but “What can I afford to lose?” Personally, I am very risk averse, and do not have the time to research individual stocks or markets. I have a mate who can drop $50K on an penny stock (or $10K on Trump), and he doesn’t sweat the loss.

        Don’t mean to tell you how to suck eggs, but every time I looked at investment options, my real question to myself was: “If you plop $X on Y, and it goes completely t!ts up, can you stomach it?” And my honest answer was “No”. Hence, I tend to select more conservative options.

  7. The mentality now is toxic; If your not making huge money on investments your a loser.
    That mentality only reverses when you have a 60%+ crash which takes years to recover.
    Suddenly everyone become a bit more humble.
    Until then it constant youtube adds with every guy with a cheap mic and camera in their moms basement telling me how to make lots of money.

    On the bright side (sort of) most investments funds have been zero growth over the past year and a half.
    Houses are still down from 2017 peak. So overall savers have some good company.

    • The 60% crash with many years of recovery will never happen if you measure the 60% in dollars. A dollar is just a unit of measurement, nothing more. The lesson from this year (and previous 12 to be honest) is that dollars are a terrible way to measure asset prices because the authorities will just print more when required. Hence the all time highs that we are experiencing.

      If you want to see a crash start measuring in something of real value other than dollars. For me this is bitcoin and gold, but for others it might be particular stocks, farmland, art, other commodities. Dollars are no longer relevant, so stop looking for a crash measured in them.

  8. The problem is they haven’t done any analysis on whether the benefit to borrowers outweighs the harm done to savers. I can say from experience that the interest income reduction has been minor (given already low rates), but theres probably been about $10k worth of consumer purchases the last month or so where Ive though, you know what I don’t really need to buy that.
    So RBA do tell how the economy is better off?

    • I’m the same. Getting essentially zero on interest – makes little difference to my personal situation and am quite content not buying anything unnecessary. The RBA can kindly GAGF.