State of play - savings accounts then and now

It’s getting harder and harder for savers in Australia, as savings accounts continue to dip below 1 per cent.

Savings accounts may be becoming nothing more than a safe place to store your money following two Reserve Bank of Australia (RBA) cash rate cuts in March. This has brought the cash rate down to 0.25 per cent off the back of five RBA-led cuts since June last year.

This means it’s more important than ever for Aussies to take charge of their finances and ensure they’re getting the most competitive deal on their savings account(s).

How the big four banks have changed in 2020

This week, ANZ and NAB announced further reductions to their savings account rates in response to the emergency Reserve Bank of Australia cash rate cut on March 19.

ANZ and NAB customers have now seen their standard savings account introductory rates fall by 0.70 per cent since the start of the year.

Australia’s biggest bank, CommBank, also cut bonus rates on its Goal Saver account by up to 0.35 per cent, while increasing the base rate on this account by 0.09 per cent, earlier this month.

Westpac has not yet announced if/when it will pass on the emergency RBA cash rate cut to its customers.

The big four bank customers aren’t alone. Analysis from RateCity.com.au shows that 29 banks have cut their rates twice since the 4 March rate cut.

For millions of savings account customers across Australia, that means the home renovation or house deposit they’re saving for will be, once again, further off than originally planned.

Big four bank standard savings accounts, then and now

Note: rates based on a balance under $50k.

Big four bank conditional savings accounts, then and now

Note: rates based on a balance under $50k

Meanwhile, banks like ING, Bank of Queensland and ME Bank announced relief for their savers who qualified for bonus interest in the past three months, by letting them automatically earn bonus interest for the next three months.

Saving accounts plunging below inflation

Analysis from RateCity.com.au shows that the average maximum interest rate on a conditional savings account has fallen 28 basis points since January 1, and the average standard savings account base rate has fallen 15 basis points.

Average savings account rates, then and now

Note: average rates based on a $25k balance. *Excludes introductory rates.

While this may seem small, it can seriously add up when you consider inflation.

Experts recommend keeping your savings account rate above inflation, otherwise your savings may not be ‘growing’ at all.

• Inflation is the rate at which the value of a basket of goods and services increases over time. Put simply, your money today may be worth less in a few years. For example, it’s the reason a movie ticket cost only a few dollars 50 years ago, compared to $20 or more today.

According to the RBA, the current inflation rate is 1.8 per cent. If your savings aren’t growing at the rate of inflation or higher, and you’re not making any additional deposits into your savings, then the value of your money may actually be decreasing over time. Your savings account might simply be just a safe place to park your money.

Searching for high interest savings accounts

As savings accounts dip further below inflation, it may become challenging for Aussies to see serious gains on their savings any time soon.

Shopping around for a more competitive savings account may be one option to consider if you’re not confident your savings account is earning you enough interest.

The easiest way to do this is to use comparison tools, such as comparison tables and calculators.

• Savings account comparison tables allow you to filter down and compare a range of options designed to suit your specific financial needs. You can view a range of accounts maximum interest rates, as well as compare how much interest you may earn on your original deposit.
• Savings account calculators can then help you calculate how much your savings may grow over time. This can be a handy resource when planning savings goals, such as a holiday, to see how long it will take to achieve this.

If you’re looking for a savings account offering interest rates above inflation, there are still options to compare.

RateCity’s database shows there are 14 savings accounts currently offering interest rates above inflation.

Market leading standard savings accounts

Note: data excludes kids and pensioner savings accounts.

Market leading conditional savings accounts

Note: data excludes kids and pensioner savings accounts.

Compare savings accounts