Australian banks are slashing interest rates on time deposits and savings, and warned that as unconventional stimulus policies lowered the cost of money, they will further reduce deposit interest rates in the future. Large banks have lowered interest rates on a series of time deposits in recent weeks, and one expert called this an unexpected result of unconventional policies designed to support bank financing in response to the New Crown Virus pandemic. After Westpac lowered its dividend rate last week, the Commonwealth Bank (CBA) has also reduced the key time deposit rate advertised as a special offer in recent days. This is just the latest move in a series of interest rate cuts in the banking industry.
Price comparison website Canstar reported that there were 167 changes in time deposits last week, of which 164 were interest rate cuts. Its financial expert Steve Mickenbecker said that this trend reflects ultra-low interbank interest rates. Mickenbecker pointed out that the reduction in deposit rates coincided with the six-month bank bill swap rate (BBSW) as a key benchmark fell to only 0.17%, even lower than the cash rate of 0.25%.
Westpac reduced a series of savings and deposit interest rates by 0.1% to 0.25% last week, indicating that banks are facing commercial pressure. A bank spokesperson said: “Under the low interest rate environment, we continue to face commercial pressure. In making this decision, we considered a variety of factors and stakeholders.”
