NAB issue major blow for millions of Aussies with cash in a bank account
Major banks, including NAB and BOQ have responded by further reducing savings rates.
While lower rates benefit borrowers, they're a blow to savers - particularly those building a home mortgage deposit or relying on interest payments for retirement.
NAB reduced its Reward Saver rate by 0.05 percentage points, bringing it down to 4.35 per cent.
Meanwhile BOQ cut the maximum rate on its account for young adults from 5.25 per cent to 5.10 per cent.
Some banks have gone even further than the RBA's 25 basis point rate cut.
ING slashed its Savings Maximiser rate from 5.40 per cent to 5.00 per cent on 2 June, a 40 basis point drop.
Across the February and May RBA cuts, ING has reduced its rate by a half a percentage point or 50 basis points.
Canstar.com.au research shows the average ongoing savings rate today is 3.07 per cent , while at the start of the year the average rate was 3.40 per cent - a drop of just 0.33 percentage points.
Rabobank also made significant reductions, though specific figures were not disclosed.
Term deposit rates are falling even faster.
The average one-year term deposit rate has dropped from 4.14 per cent on 1 January to 3.52 per cent - a 0.62 percentage point fall in just six months.
Sally Tindall, Canstar's data insights director, warned that savers should brace for more reductions:
'While the average savings rate on our database is an uninspiring 3.07 per cent, there are six banks still offering an ongoing savings rate of 5 per cent or more. That said, if the RBA wields its knife again in July or August, savings rates starting with a 5 won't last beyond winter.
'Term deposit rates are, unsurprisingly, falling faster than at-call savings rates, as banks continue to bake in further cash rate cuts into the fixed rate term.
'If you're someone who likes the certainty and security a term deposit can bring, time is of the essence as these rates are likely to keep on falling in the weeks ahead.'
Her comments follow an updated forecast from Luci Ellis, Westpac's chief economist and former Reserve Bank official, who has now included two additional interest rate cuts in her 2026 outlook.
On top of two 25 basis point cuts to the key lending rate in August and July in 2025, Ms Ellis predicts additional reductions by the central bank in February and May.
That would leave the cash rate at a terminal figure of 2.85 per cent, from the current rate of 3.85 per cent, meaning mortgage holders would save $350 a month.
The additional cuts could come even earlier, potentially in December and February, if inflation and the labour market unfold even weaker than expected in late 2025, Ms Ellis said earlier this month.
Changes to the inflation outlook mean arguments in favour of more cuts in 2026 are building.
A faster-than-anticipated fall in immigration will ease rental costs, dragging down inflation, which Westpac now believes will drop below the midpoint of the RBA's 2-3 per cent target by the end of the year.
'We believe that would tip the RBA in favour of cutting the cash rate further,' Ms Ellis said.
'Indeed, if we are right, the RBA might be in for a bit of an 'oh crikey!' moment late this year.'
Australia's economy is at risk of a slower-than-expected recovery, as disappointing GDP growth figures in last week's national accounts revealed, amid a 'shaky handover' from public to private spending.
'Consumer spending is tracking weakly, as we expected. We are now starting to see this weigh on business activity. The result is likely to be soggy growth and surprisingly weak wages growth despite apparently low unemployment,' Ms Ellis said.
CBA and ANZ predict just two more rate cuts, beginning in August, while NAB is the only big four bank betting on the RBA to cut rates at its next meeting in July. All up, NAB expects three more cuts to the cash rate that would see it fall to 3.1 per cent, down from 3.85 per cent now.
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