The RBA’s Rate Cut: A Double-Edged Sword
The Reserve Bank of Australia (RBA) has delivered its second interest rate cut in the current cycle, reducing the official cash rate to 3.85 per cent. While this move might be met with celebration by mortgage holders, it has delivered a gut punch to Australian savers. With major banks already responding by slicing returns on savings accounts, it’s clear that the fallout from this decision will not be shared equally across the financial spectrum.
Banks Move Swiftly—But Not Equally
In the wake of the RBA’s decision, two of the big four banks—NAB and Westpac—wasted no time in announcing slashes to their savings account interest rates. NAB trimmed its Reward Saver and iSaver rates by 25 basis points, now offering 4.4 per cent and 4.65 per cent respectively. Similarly, Westpac has followed suit, aligning savings rate reductions with changes to its variable mortgage offerings.
Smaller institutions, including challenger bank Macquarie, have also jumped on board. Macquarie cut its savings rate to 4.85 per cent, marking one of the highest among ongoing rates but still reflecting a concerning downward trend. With other banks expected to follow, savers should brace for more cuts in the coming months.
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“Just the Tip of the Iceberg”
Sally Tindall, Canstar’s data insights director, has been vocal about the growing disparity. “This is just the start of what will be an onslaught of rate cuts for savers,” she warned. “It’s disappointing to see some banks chop savings rates ahead of their mortgage rates.”
This sentiment is not unfounded. While banks are quick to advertise mortgage relief as a win for borrowers, their quieter moves to reduce savings rates tend to fly under the radar. This tactic shifts the burden to savers—especially older Australians relying on interest income or younger Aussies striving to build a deposit for their first home.
Savers Left Behind
With the RBA forecasted to cut rates even further—markets are pricing in at least three more reductions by February 2026—savers could be facing a prolonged period of shrinking returns. NAB has projected that the cash rate could fall as low as 2.6 per cent by early 2026, a level not seen since before the inflation spike in 2022.
The impact is clear. Already, term deposit rates are slipping below the 5 per cent threshold. While some niche providers such as Heartland and Judo Bank still offer competitive rates for fixed terms, these options often come with fine print and are limited in availability.
A Call for Rate Shopping
Tindall has urged Australians not to passively accept these changes. “If your savings rate has already changed, don’t get mad—get even by taking your savings rate shopping,” she said. With market competition still alive, especially among online and digital banks, there are still some good deals to be found. However, the window is closing fast as more institutions adjust in lockstep with the RBA’s trajectory.
A System Built for Borrowers?
There’s an increasing perception that the financial system disproportionately favours borrowers over savers. This imbalance is particularly stark in the current environment, where home loan rates are slashed in highly publicised moves, while savings rate cuts are often quietly slipped through.
Some experts argue it’s time for banks to reverse this trend and consider the long-term implications of discouraging saving. Without meaningful incentives to save, financial resilience among households may weaken—especially in a volatile global economic landscape.
Inflation Eases, But At What Cost?
The RBA has justified its cuts by pointing to inflation easing into its 2–3 per cent target band. With the economy showing signs of softening and global pressures, including Donald Trump’s proposed tariffs, interest looming large, the RBA appears to be shifting to a stimulative stance.
But while rate cuts may help boost spending and investment, they also risk interest penalising those who took a conservative approach to their finances. Retirees living off fixed interest incomes, for example, are being forced to accept diminishing returns or take on more risk than they’re comfortable with.
What’s Next for Savers?
The message for savers is simple: stay alert, stay informed, and be ready to act. Watch for changes from your bank, compare rates frequently, and consider diversifying your savings strategy. Whether through high-interest accounts, term deposits, or other investment vehicles, the key is to remain proactive.
The financial landscape is shifting, and unfortunately, those who interest sit still may find their nest eggs eroded not by market crashes, but by a slow, steady drip of falling interest rates.
