There is still $82 billion invested in term deposits in New Zealand. While this is down from a peak of $104 bln in August 2019, it still represents 40% of household deposit assets ($209 bln) even if it's only 6% of total household financial assets ($1.427 tln). (RBNZ S40 and C22.)
The only reason deposits are placed at a fixed term is to earn a return, interest.
But these returns have been lean for the past two years.
However, they are improving, even if savers think the pace of improvement is too slow.
That may pick up soon if wholesale interest rates keep rising as they have done over the past few weeks.
That turn up has happened here, but there is no sign it will be rising anytime soon in Australia.
So now is an opportune time to check where we stand, and where we stand compared to savers across the ditch.
Here are the key positions in New Zealand:
| Term deposit rate | 3 mths | 6 mths | 1 year | 18 mths | 2 years |
| at least $10,000 | % | % | % | % | % |
| ANZ | 0.50 | 1.10 | 1.40 | 1.40 | 1.60 |
| ASB | 0.45 | 1.00 | 1.30 | 1.45 | 1.60 |
| BNZ | 0.45 | 1.10 | 1.40 | 1.45 | 1.60 |
| Kiwibank | 0.45 | 1.15 | 1.35 | 1.70 | |
| Westpac | 0.40 | 0.90 | 1.30 | 1.35 | 1.60 |
| Average these five | 0.45 | 1.05 | 1.35 | 1.41 | 1.62 |
| Bill or swap rate | 0.68 | 0.87 | 1.19 | 1.30 | 1.50 |
| margin from swap (bps) | -23 | +18 | +16 | +11 | +12 |
| NZ CPI rate | 3.30 | 3.30 | 3.30 | 3.30 | 3.30 |
Of course, other investment grade smaller banks offer higher rates, with the offers of banks like Heartland Bank and Rabobank up to +30 basis points above some main bank offers.
Clearly, current rates are all less than inflation. And that is also before income tax considerations are made, which will make it even more negative.
But as bad as things are for Kiwis, they are worse for Aussies who use term deposits for income.
Here is their situation:
| Term deposit rate | 3 mths | 6 mths | 1 year | 18 mths | 2 years |
| at least $10,000 | % | % | % | % | % |
| ANZ | 0.05 | 0.10 | 0.20 | 0.20 | 0.20 |
| CBA | 0.08 | 0.20 | 0.35 | 0.35 | 0.35 |
| NAB | 0.10 | 0.20 | 0.25 | 0.25 | 0.30 |
| Suncorp | 0.45 | 0.45 | 0.40 | 0.35 | 0.50 |
| Westpac (*=5 mths) | 0.07 | 0.30* | 0.25 | 0.25 | 0.30 |
| Average these five | 0.15 | 0.25 | 0.29 | 0.24 | 0.33 |
| BKBM or swap rate | 0.01 | 0.03 | 0.05 | 0.10 | 0.20 |
| margin from swap (bps) | +14 | +22 | +24 | +14 | +13 |
| AU CPI rate | 3.80 | 3.80 | 3.80 | 3.80 | 3.80 |
| NZ advantage % | +0.30 | +0.80 | +1.06 | +1.17 | +1.29 |
| advantage after inflation | +0.80 | +1.30 | +1.56 | +1.67 | +1.79 |
Just to be clear, the 'advantage' is relative and is for New Zealand savers over Aussie savers in the same type of term deposit instrument. It doesn't account for tax, and all are negative after inflation - just less so in New Zealand than Australia.
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