Westpac, NAB, ANZ drop term deposit rates

Three of the big banks have dropped select term deposit rates so far this week, signalling cuts to the cash rate may be imminent and perhaps hastened - or deepened - as the fallout from US trade tariffs grows. 

On Tuesday, Westpac announced its 11-month special offer rate was being cut by 30 basis points to 4.20% p.a. for amounts between $5,000 to $2 million, with interest paid monthly or end of term.

The offer is available only to existing Westpac customers and those opening or renewing online can earn an extra 0.10% p.a. bonus rate.

Then on Wednesday, ANZ took up to 30 basis points off a swathe of its Business Notice term deposit rates.

All now have a 3 in front after ANZ's highest business deposit rate - for 12 months - fell from 4.00% p.a. to 3.70% p.a.

This follows 20 basis point cuts to some of it personal term deposit rates at the end of March.

NAB trims and boosts 7 month rate

NAB is the latest of the big banks to slice its term deposit offerings.

It's taken 10 basis points off many of its shorter term rates but has added 75 basis points to its seven month rate, lifting it to 4.25% p.a. for amounts between $5,000 and under $2 million with interest paid end of term.

The rate is now NAB's highest term deposit offering and joins the 12-month rate of 4.00% p.a. as being the bank's only term deposit rates with a 4 in front.

Big four peer CommBank is still offering a top rate of 4.50% p.a. for 10 months but the special offer is due to expire on Wednesday 9 April. 

CBA's next best, its 12-month rate, is currently 4.05% p.a. for amounts between $5,000 to under $50,000 with interest paid annually.

Since the start of the year, CommBank has made monthly cuts to its term deposit rates.

Its last round was at the end of March.

What are the big banks up to?

It's no secret the market is preparing for an imminent cash rate cut next month.

The question now is how deep it will go, given fears US trade tariffs and the ensuing retaliatory fallout may plunge the global economy towards recession. 

Australian markets are now pricing in an 82% chance of a 0.50% cut to the cash rate in May to 3.60%.

You read that right - the ASX rate indicator has skipped from a 0.25% to a 0.50% cut to the cash rate in just the past week.

The big banks now all agree there will be a three to four cuts to the cash rate this year.

ANZ was the last to the join the fold after the tariffs took effect last week and its economists haven't ruled out a 0.50% cut to the cash rate next month. 

How will the Reserve Bank respond to US tariffs?

Economists say a May cut to the cash rate is all but assured, with the RBA expected to ease monetary policy further and faster than many predicted just a week ago.

Even conservative analysts, including HSBC's Paul Bloxham who spoke on the Savings Tip Jar podcast only last week, had changed their forecasts by week's end.

Federal Treasurer Jim Chalmers is taking time out from election campaigning to meet with the country's top economic officials to gauge a response to the financial chaos triggered by the tariffs.

Among the participants is Reserve Bank governor Michele Bullock who will no doubt be keeping a close watch on world events before the RBA's Monetary Policy Board meeting on May 19-20.

APRA and ASIC officials are also joining in to discuss the potential impact on Australia's financial stability.

What will it mean for the punters?

For those with mortgages holding out for interest rates to fall further, 2025 may be looking rosier for multiple interest rate cuts.

But if this happens, it may be to outrun a rapidly slowing, low-growth economy which brings its own challenges.

For savers and those looking to term deposits for earnings, the prospects are not so optimistic.

As the cash rate drops, so too will term deposit rates - with many Authorised Deposit-Taking Institutions (ADIs) making sizeable cuts in anticipation of lower rates long term. 

For investors, stock markets and bond yields are also feeling the effects of the current economic uncertainty.

Australian bond yields are fluctuating in the wake of tariffs while the Australian dollar has seen a substantial fall, reflecting the instability in the global economic outlook.

Investors are chasing one of the safest assets out there - bonds, both treasury and corporate - which bumps up the price, consequently pushing down the yield in the wake of sharemarkets plummeting. 

Banks often yield-curve match what they get on the bond market, and pass that onto term deposits.

Perhaps the only certainty in the current climate is that the RBA will have much to consider when it meets next month. 

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