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Saving slowed over Christmas, but Aussies squirrelled away $100b

Saving slowed over Christmas, but Aussies squirrelled away $100b

The rate of savings slowed in November according to the latest data from the Australian Prudential Regulation Authority (APRA), as millions of Aussies undoubtedly spent more on groceries and gifts in the lead up to Christmas.

However, since COVID-19 first hit Australia (March 2020 - November 2020), APRA data shows that Aussies have managed to squirrel away over $100 billion in deposits.

Strict stay-at-home regulations, paired with overall uncertainty in household budgets, means many have been either able to save more, or pressured to save more, than ever before.

Deposits by households: November 2019 – November 2020

Nov-2020Oct-2020Mar-2020Nov-2019
Deposits by households

$1,099,485,200,000

$1,098,424,100,000

$998,739,600,000

$979,521,800,000

MoM/cumulative change ($)

$1,061,100,000

$100,745,600,000

$119,963,400,000

MoM/cumulative change (%)

0.10%

10.09%

12.25%

Source: APRA.gov.au & RateCity.com.au

The fallout of this increase in savings has potentially led more banks to cut interest rates out of cycles, as banks are being flooded with cash that they cannot afford to pay interest on.

While the Reserve Bank of Australia (RBA) did cut the cash rate to a record-low of 0.10 per cent in November, many banks still passed on additional cuts to their deposit customers. Australia’s biggest bank, Commonwealth Bank, passed on a second rate cut to its NetBank saver and GoalSaver accounts in mid-December.

RateCity research found that 11 banks have made out-of-cycle rate cuts in the first eight days of January alone.

Further, RateCity research found that the average highest rate you can now earn as a saver has plunged well below 1 per cent. The average maximum rate for conditional savings accounts is now 0.71 per cent, and the average maximum rate for introductory accounts is only 0.88 per cent.

If your bank is making frequent out-of-cycle rate cuts, it’s worth considering this a sign to perform a financial health check on your savings account to ensure it’s still the most competitive option for your financial needs.

Four banks still hold the biggest piece of the pie

Australia’s big four banks – CBA, Westpac, ANZ and NAB – still hold the largest market share of deposits by households, according to APRA data.

CBA leads the country’s bank with a 27.15 per cent share, totalling over $298 billion in November. But while Westpac retained its second-place position, its deposits dropped $371 billion in November.

Top 15 Banks by deposit size (deposits by households)

PositionInstitution NameDeposits by households (Nov 2020) % of deposits (Market Share) Deposits by households (Oct 2020) MoM change in total deposits ($) MoM change in total deposits (%)

1

Commonwealth Bank of Australia

$298,536,700,000

27.15%

$297,510,100,000

$1,026,600,000

0.35%

2

Westpac Banking Corporation

$230,234,800,000

20.94%

$230,606,000,000

($371,200,000)

-0.16%

3

National Australia Bank Limited

$147,120,100,000

13.38%

$146,664,300,000

$455,800,000

0.31%

4

Australia and New Zealand Banking Group Limited

$138,737,800,000

12.62%

$138,534,700,000

$203,100,000

0.15%

5

ING Bank (Australia) Limited

$40,247,600,000

3.66%

$40,462,500,000

($214,900,000)

-0.53%

6

Bendigo and Adelaide Bank Limited

$33,666,700,000

3.06%

$33,572,600,000

$94,100,000

0.28%

7

Suncorp-Metway Limited

$28,032,300,000

2.55%

$28,035,600,000

($3,300,000)

-0.01%

8

Macquarie Bank Limited

$20,347,300,000

1.85%

$19,775,700,000

$571,600,000

2.89%

9

Bank of Queensland Limited

$16,614,800,000

1.51%

$16,618,800,000

($4,000,000)

-0.02%

10

HSBC Bank Australia Limited

$13,422,300,000

1.22%

$13,558,600,000

($136,300,000)

-1.01%

11

Credit Union Australia Ltd

$10,319,700,000

0.94%

$10,377,400,000

($57,700,000)

-0.56%

12

Members Equity Bank Limited

$9,738,800,000

0.89%

$9,831,900,000

($93,100,000)

-0.95%

13

Newcastle Permanent Building Society Limited

$7,594,000,000

0.69%

$7,613,100,000

($19,100,000)

-0.25%

14

Teachers Mutual Bank Limited

$6,853,700,000

0.62%

$6,798,800,000

$54,900,000

0.81%

15

Heritage Bank Limited

$6,653,000,000

0.61%

$6,556,400,000

$96,600,000

1.47%

Source: APRA.gov.au & RateCity.com.au

APRA data also found that some neobanks in Australia may be on shaky ground. Judo Bank, which boasts one of the most competitive term deposit rates on the market, has continued its steady increase in deposits. It boasted a deposit (by household) amount of $1.2 billion in November 2020. While this only represents 0.11 per cent of the market, it’s a deposit increase month-on-month from October of 5.4 per cent.

However, both Volt and Xinja experienced decreases in November - the latter of which in December announced it was returning its banking licence and all deposits to account holders. Prior to November, these neobanks had previously recorded monthly increases to their deposit books.

It’s worth wondering if some Xinja customers in November acted pre-emptively, sensing a change was coming. Further, with Volt still in ‘beta testing’ for some time now, some customers may have lost hope and considered switching account providers.

Tips for Aussie savers looking for new deposit accounts

Whether you love to lock in a competitive rate with a term deposit or prefer the flexibility of a savings account, there are a few tried-and-true tips worth considering when comparing your options.

  1. Know the ongoing interest rate, not just the introductory rate to get you in the door.
  2. Research what fees are involved, whether you can afford them, and if they outweigh the interest you may earn.
  3. Check what conditions, if any, are required of you to earn the highest ongoing interest rate.
  4. Look outside of your childhood bank. The most competitive interest rates generally come from competitor deposit providers, so it’s worth doing your research.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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