The RBA’s latest statement on monetary policy says customers are switching to term deposits where banks are more generous.
People are moving their money into term-deposits as banks increase their interest rates for long-term savers by more than the Reserve Bank’s cash rate, while holding back on the types of everyday accounts where most people keep their money.
Banks earn about 80 per cent of revenue on interest payments from loan customers, and the rest from fees and charges. In a sign that the banks’ stellar earnings should remain elevated, the RBA statement said deposit funding costs had increased in calendar 2022 by less than the cash rate as a result of banks not passing through increases to transaction accounts.
Banks have also responded to more competition in wholesale deposit markets by rewarding big investors at the expense of household savers.“Banks have passed on larger rate increases to wholesale depositors than households. This different treatment is likely, in part, to reflect wholesale depositors having a wider range of market-based alternatives in which to place cash,” the RBA said.
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