ANZ the last major bank to cut savings rates

ANZ Bank has reduced the interest rates on its Progress Saver and Online Saver deposit accounts by 20 basis points to 2.2 per cent p.a. and 0.3 per cent p.a., respectively.

The major bank has not outlined the reason for its decision, but a spokesperson said: “Progress Saver at up to 2.20 per cent p.a. still offers the best rate of the major banks for a comparable product.”

The move follows ANZ slashing interest rates on various Advance Notice term deposits by up to 60 basis points earlier this month.

It comes just weeks after the major bank increased the 11-month term deposit rate by 80 basis points to 2.35 per cent, when ANZ CEO Shayne Elliot noted that depositors have “done it tough” in an environment of rate cuts. 

An ANZ spokesperson said at the time that this rate increase “offers some certainty of return in a low interest rate environment”. 

At the time of the announcement, ANZ group executive, Australia retail and commercial, Mark Hand, added: “We recognise it has not been an easy environment for customers who are trying hard to save their money and get a decent return.

“In making this decision, we have sought to get the balance right to provide a highly competitive rate for savers over an 11-month term on the back of yesterday’s announcement to cut home loan rates.

“We’re making an effort to provide an attractive option for savers and retirees who rely on interest income.”

Westpac had also slashed its savings account rates by 20 basis points, while both CBA and NAB cut by 25 basis points. 

A 'nightmare equation' for savers

RateCity.com.au data shows that over 47 banks have dropped their savings rates since the RBA cash rate cut on 4 June, including ING, AMP, Bank of Queensland, ME, Suncorp and Bendigo, in addition to the big 4 banks. 

The average cut to savings account rates by banks who have moved is 0.23 per cent, while the maximum cut on the database is 0.50 per cent. As a result of all the changes, the average savings account rate on RateCity.com.au’s database is now 1.55 per cent, it said.

RateCity.com.au research director Sally Tindall commented: “Introductory rates have become the white elephant of banking. 

“All four big banks have slashed their base rates to just 0.30 per cent interest, when inflation is sitting at 1.3 per cent. That’s a nightmare equation for anyone trying to save.

“There’s no sugar coating the outlook for savers right now. With at least one, if not two more cuts to the cash rate on the horizon, the average saving rate could fall to 1.30 per cent.

 “Good saving rates might be hard to come by but it’s still worth shopping around,” she said.

Likewise, Canstar’s finance expert, Steve Mickenbecker, correctly predicted that the amount ANZ and Westpac would cut to their savings rates wouldn’t be “so deep” because, unlike CBA and NAB, they did not pass on the full 25-basis-point rate cut made by the Reserve Bank earlier this month.

Mr Mickenbecker said the savings rate cuts were foreseeable following the RBA’s decision to drop the official cash rate to a new record low of 1.25 per cent.

“This leaves savings rates at rock bottom levels and will put the banks under intense pressure if and when the RBA cuts the cash rate again in the next few months,” he said.

“The potential to squeeze profit margins will be keeping bank executives awake at night.”

Vadim Taube, chief executive of InfoChoice, previously said at-call savings accounts rates have never been this low. 

“These rates are now only fractionally above the inflation rate of 1.3 per cent and the base rates are all well under the inflation rate. That means your money is not growing significantly in real terms and could be losing value if you leave it sitting in one of these low-rate savings accounts,” Mr Taube said.  

“I urge all savers to check their savings account and compare it with the rest of the accounts in the market. There’s no need to put up with a savings account that pays a pittance.”

[Related: RBA reluctant to drop rates to ‘dangerous’ low]