Over the pandemic period, at-call savings accounts became popular. From February 2020 an additional $25 billion was parked in them, raising these balances by 46%. They rose to $80 billion at their peak in April 2022.
Savers will have noticed recently that banks have simplified their account offerings, and that bonus or incentive-saver accounts are now the main offerings.
Some banks have even simplified these accounts to the point that the top interest rate is always earned. Others still maintain the penalty if you withdraw early or too often.
And a recent feature is that these accounts are offering sharply higher interest rates. Average bonus saver accounts now pay more than 3% for the first time since September 2015. The rise has come quickly. It was just 0.17% on average in September 2021 and didn't go over 1% until June 2022.
The current 3%* also stands out as a level that generally applied from 2009 to 2015.
But it is nowhere near the rates above 7% that were on offer in the few years before the Global Financial Crisis.
Oddly, balances rose when rates fell, and are falling now that rates are rising. Despite looking good in the chart below, savings account rates rate rises are nothing like the term deposit rate offers, which are drawing funds to those fixed term offers. SBS Bank currently offers 6% for a one-year term.
A longer term perspective shows that the current higher rates are back to 2015 levels.
But these new, "better" levels are no match for inflation.
So the after-inflation rates are now at about their worst level this generation.
It is no wonder savings account balances are falling again. This is another reminder why inflation is a thief of household income and wealth.
The problem with this inflation effect is that it induces desperate savers to seek better returns from risky options. And the desire for better returns induces charlatans to appear and make unsustainable offers to meet the need.
The best remedy is to reduce inflation in a sustainable way. And perhaps for banks to again offer inflation-positive savings options that they did for most of the period prior to 2017.
*Note, this article is only about bank savings accounts. There are some broker cash management accounts that currently offer over 4%.
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