What lengths will Australia’s financial institutions go to secure our savings? Andrea Sophocleous investigates.
December 1, 2009
Among the many negative side effects of the global financial crisis, there was also a positive trend – since the GFC begun to bite, Australians have been saving more than they used to.
Recent data from the Australian Prudential Regulation Authority (APRA) reveals an increase in household deposits from over $300 billion in 2007 to over $440 billion in 2009. Despite this growth, however, per capita Australians remain among the world's worst savers. We borrow a lot more from banks than we save – which leaves the banks at the mercy of the international markets, having to borrow money at an increasing cost since the global financial crisis.
“As a nation, Australia is in savings deficit,” says Commonwealth Bank (CBA) chief marketing officer Mark Buckman. “That means we lend more money than we have on deposit. This requires CBA and other banks to raise money from both domestic deposits and the offshore wholesale markets.
“Obviously it is preferable to raise as much as possible through domestic deposits rather than having to compete with other nations in the international markets.”
That makes savings the hot spot of banking, and Buckman agrees there is “enormous competition” among banks to grow their share of your savings. As a consequence, expect to be bombarded with special offers and promotions as the banks turn on the charm to attract you to their savings products.
CBA is by far the most popular option for savings accounts, with a 28.24 percent share of deposits, according to September figures from APRA. This is almost twice the share of Westpac (14.53 percent) and more than ANZ and National Australia Bank (NAB) combined, at 13.98 percent and 13.11 percent respectively.
NAB recently announced it will abolish monthly fees on 12 of its transaction and savings accounts, including the popular Classic and e-Banking accounts, in a bid to attract new customers to its savings accounts. In addition, NAB's online banking arm, UBank, is hoping to gain more customers with the USaver rate assurance which guarantees that the interest rate on its USaver account will remain equal or higher than five other popular high interest savings accounts: ING Direct Savings Maximiser, Bankwest TeleNet Saver, Commonwealth Bank NetBank Saver, Westpac eSaver and ANZ Online Saver.
This is just a snapshot of what is on offer. To sort out a good deal from a slick promotion, you will have to research and carefully consider all your options. RateCity can help you identify the highest interest rates being offered, but you should also consider account features such as whether you have to maintain a minimum balance, make regular deposits or restrict your withdrawals among others.