Entering 2020, although the market is expecting the RBA to further cut interest rates, the latter has not yet taken action. Nevertheless, three of Australia’s four largest banks have quietly lowered savings account rates.
According to data provided by the Australian interest rate comparison website Mozo, since 2020, the National Australia Bank (NAB) has reduced its savings rate by 0.11%, the Westpac savings rate has been reduced by 0.10%, and ANZ’s The savings rate fell by 0.05%. In other words, of the four major banks, only the Commonwealth Bank of Australia has not cut its savings rate for the year. Although the reduction does not seem to be significant, from two perspectives, this round of reduction in savings rates is significant.
This poses a huge problem for the central bank: even if the central bank cuts interest rates, commercial banks will not be able to follow up, and it is likely to push the macro economy into a dilemma of “liquidity trap”. The liquidity trap means that when the level of interest rates is lowered for a certain period of time, people will have the expectation that interest rates will rise and bond prices will fall, and the elasticity of money demand will become infinite, that is, no matter how much money is added, it will People store up. When a liquidity trap occurs, even loose monetary policy cannot change market interest rates, making monetary policy invalid.
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