The battle for deposits amongst Australian lenders seems to be petering out, with only two of the country’s top online savings accounts passing on November’s interest rate hike by the Reserve Bank of Australia, to their customers in full.
Despite failing to pass on the interest rate increase to depositors, bank’s continue to make the argument that higher funding costs are the reason behind higher interest rates which have been passed onto borrowers in excess of official rate hikes by the central bank.
As interest rates have steadily risen over the last year, new data shows that ordinary Australians are saving the most they ever have in two decades. Economists attribute the trend to being as a result of consumer concern over the direction of interest rates and the future trajectory of the economy.
National income accounts data which was released on Wednesday shows that growth of the Australian economy slowed down during the September, expanding by a moribund 0.2 per cent, the slowest recorded level since the end of 2008, when the financial crisis was at its greatest, and the fifth slowest recorded growth rate since 2000.
Australia’s largest banks are using high introductory online savings rates to attract retail deposits and expand their deposit bases. Despite the high introductory rates, the lenders later aggressively cut back their deposit rates in order to preserve their profit margins.
The investment bank Macquarie conducted an analysis of the online savings market which found that the big four Australian lenders, as well as some international rivals were offering introductory rates that were as much as 200 basis points higher than the 4.5 per cent official cash rate.
Australians are saving more with the level of household savings increasing during the June quarter. However credit card have usurped the mortgage as the main type of debt being carried by Australians for the first time in nearly four years according to the results of a survey.
David Liddy, chief executive of regional lender Bank of Queensland says the market for retail deposits has become dysfunctional, and wants the government to help restore competition between smaller regional lenders and the major banks.
With governments globally raising income tax rates globally in their response to fiscal deficits run up during their attempt to deal with the financial crisis, it is becoming increasingly difficult to save.
In Australia, fortunately the government so far has yet to raise tax rates, the top marginal tax rate is the same as it was last year however it is still at a hefty 45 per cent.
Australian banking major ANZ is training up its staff to enable it to offer specialist retirement bankers stationed across all its 820 nationwide branches by the middle of 2010.
Australian depositors are losing approximately $10 million a day in interest payments, because of the mistaken belief that small regional banks are in danger of collapsing as a result of the global financial crisis.
Fund managers who manage mortgage income funds want the Federal Government to end the government guarantee on bank deposits as a measure aimed at reviving the $25 billion industry.
The Federal Government plans to oversee more carefully, the fees that retail investors must bear when purchasing or investing in superannuation investment products.