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The
battle for cash deposits in Australia has hit absurd levels with term
deposits now yielding far more than mortgage rates. Please consider Bank deposit war
lifts costs, says RBA.
The
Reserve Bank has accused the major Australian retail banks of driving up
their own funding costs by competing in a retail deposit war that has forced
up savings rates to win customers.
The top four banks have engaged in an intense battle over the past year to
attract retail deposits and ease their reliance on volatile offshore markets
for funding.
The move has resulted in some term deposit rates being higher than mortgage
rates for the first time in two decades.
The RBA said some "special" term deposit rates offered by the major
banks were up to 180 basis points above the three-month bank bill rate,
compared to just 75 basis points in December 2008 at the peak of the global
downturn.
The average term deposit rate now is 5.93 per cent while the official rate is
4 per cent, implying a spread of 193 basis points.
"But it's been interesting to see over the last two to three weeks it
has moderated somewhat as far as pricing is concerned," Mr Norris told a
Credit Suisse conference in Hong Kong.
"I think that's because banks are seeing it's somewhat of a zero-sum
game. There's a pool of hot money that churns through the banks, and in the
end it doesn't materially change any bank's market share."
My Friend
"BC" comments: This is likely to backfire when the Aussie credit
bubble bursts during the next deflationary downturn, as real estate and
commodities prices again fall and loans go bad, requiring Aussie banks to
increase or maintain reserves against those deposits.
Mish
GlobalEconomicAnalysis.blogspot.com
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