Australians with money in the bank are now earning even less interest after the Reserve Bank slashed rates in May – while mortgage holders are tipped to get more relief.
Major banks like NAB and BOQ have responded by cutting savings account rates again in June, delivering another blow to savers.
While lower interest 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 five basis 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 per cent on June 2, a 40 basis point drop.
Across the February and May RBA cuts, ING has reduced its rate by half a percentage point or 50 basis points.
Australian savers are being punished following the Reserve Bank’s latest rate cut
Canstar 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 33 basis 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 January 1 to 3.52 per cent – a 0.62 percentage point fall in just six months.
Sally Tindall, Canstar’s data insights director, warned savers to 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,’ she said.
‘That said, if the RBA wields its knife again in July or August, savings rates starting with a five 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.
Canstar data insights director Sally Tindall said savers were set for more punishment
‘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 Westpac chief economist Luci Ellis, a former Reserve Bank assistant governor, who is now expecting two more RBA rate cuts in 2026 – in February and May.
This would be on top of two 25 basis point cuts in July and August this year.
Those four cuts would see the RBA cash rate drop to 2.85 per cent, from the existing rate of 3.85 per cent – saving the average home borrower $350 a month.
The additional cuts could come even earlier, potentially in December and February, if inflation continued to fall as unemployment rose in late 2025.
A faster-than-anticipated fall in immigration would ease rental costs and help reduce inflation, which Westpac now believes will drop below the mid-point of the RBA’s two to three 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 economic growth is already weak following 13 rate rises in 2022 and 2023.
‘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,’ she 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 cutting 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.
