Mozo Money Moves: CPI surge spurs rate hike panic as Australia’s Best Banks & Banking Apps revealed

image of piggy bank in front of home with rate arrows going up and down to show shifting cash rate forecasts

Welcome back to Mozo Money Moves, our weekly wrap where we dive into Australia's banking landscape, and bring you the latest in personal finance news. 

This week, an uptick in the monthly CPI annual inflation data spurred a rate hike panic, in the lead up to the August RBA cash rate decision, and one Big Four bank pushed back their cash rate cut forecasts.

However, as Mozo continues to monitor the pulse of the market our team believes we are more likely facing a higher-for-longer environment, and that unless there is a nasty surprise in the quarterly CPI data, the RBA’s next move will be a cut.

Mozo also revealed Australia’s Best Banks and Banking Apps this week, awarding them as the winners of the Mozo Experts Choice Awards 2024.

Let’s get into it!

Inflation Moves

This week, the latest Consumer Price Index (CPI) release from the Australian Bureau of Statistics (ABS) reported a 4.0% rise in annual inflation for May 2024, up from April's 3.6%. The most significant contributors to the annual rise to May were Housing (+5.2%), Food and non-alcoholic beverages (+3.3%), Transport (+4.9%), and Alcohol and tobacco (+6.7%)

However, as Michelle Marquardt, ABS head of prices statistics pointed out, volatile items like automotive fuel, fruit and vegetables, and holiday travel can skew CPI figures and “it can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation, which was 4.0 per cent in May, down from 4.1 per cent in April."

The uptick in inflation caused commentators to speculate on the potential for another rate hike in August, so Mozo decided to crunch the numbers to see the dollar value impact of a 14th hike, and why homeowners may want to consider switching to a lower home loan rate with a non-Big Four bank.

73% of the owner occupier mortgage market have a home loan with the Big 4, but Mozo analysis shows switching to a bank outside the four majors could save homeowners hundreds of dollars a month - or thousands of dollars a year.

Marshall suggests for those who can afford to refinance, looking outside the Big Four banks is a great place to start. 

"While the differences in interest rates may not seem huge, when you look at it in a practical sense you could be paying hundreds of dollars more every month if you are with a big four bank, in comparison to a non-big four lender.”

Switching outside the Big Four Banks could save you up to $4,105 a year.
source: Based on 25 year terms, Owner Occupier Principal & Interest, LVR <80%. Average variable rate of Big Four Banks, 7.31%, and Average variable rate of lenders excluding the Big Four, 6.78%, as of June 2024. These rates plus 0.25% used for Cash Rate at 4.60% level. Data accurate as at 27 June 2024

In response to the slight uptick, one big bank also changed their cash rate cut forecast. National Australia Bank (NAB) announced on Wednesday that they “now expect the RBA to remain on hold for longer, with a first rate cut now unlikely until May 2025.”

Peter Marshall, Mozo's banking and rates expert believes the RBA will do what they can to avoid inflicting another rate hike on borrowers unless absolutely necessary.

“Despite the slight inflation uptick, I still believe the RBA’s next move is a cut,” said Marshall. “While the latest CPI is disappointing and raises the risk of another rate increase before the next cutting cycle, there's a possibility the CPI bump will even out.”

“The August RBA meeting will be a live one, and if the central bank holds again, they’ll be sure to communicate the potential for another rise in the hopes it will curb spending without an actual rate increase.”

Credit Card Moves

This week, Mozo has also been keeping an eye on credit cards, after the purchase rates on all Big Four banks' rewards cards reached over 20.99% or more last week, and Bankwest announced to customers they would be cancelling complimentary travel insurance from 3 September 2024.

Looking at the Mozo database at rewards credit card changes over the past 12 months shows several providers have withdrawn or altered their credit cards with complimentary travel insurance. The number of providers offering unlimited cancellation cover has halved, and those offering unlimited medical cover have dropped significantly.

“The gradual devaluation of credit cards is clear,” explains Marshall. “Higher fees, rising interest rates, and reduced rewards are now the norm.”

“The impact of the growing popularity of Buy Now Pay Later services is also heavily impacting the profitability of credit cards.”

Recent research from Mozo* highlighted that over half of Australians (56%) now use Buy Now Pay Later (BNPL) services, with nearly half (49%) of those using multiple accounts, attracted by the convenience and interest-free options.

"As more and more consumers opt for BNPL, credit card issuers are adjusting features and costs to maintain their profitability.”

“Credit card holders should closely review their credit card conditions and read their statements in full to avoid any unexpected surprises."

Australia’s Best Banks & Banking Apps 2024

This week, Mozo has announced the winners of two highly anticipated Mozo Experts Choice Award 2024 categories: Australia’s Best Banks and Australia’s Best Banking Apps.

Peter Marshall, Mozo Experts Choice Awards Judge, shared his thoughts on why each of these banks deserved recognition for their product offerings and their innovative digital banking experiences.

Australia's Best Banks 2024

Mozo rigorously assessed 85 providers, 55 of which had won at least two Mozo Experts Choice Awards in the past 12 months, to name six banks as the best in Australia. 

Australia’s Best Bank: ING “ING’s comprehensive suite of products showcase their ability to provide exceptional value across multiple categories.”

Australia’s Best Customer Owned Bank: People First Bank "Heritage and People’s Choice were both leaders in their own right, and their merger has created a powerhouse in customer-owned banking." 

Australia’s Best Small Customer Owned Bank: Easy Street "Easy Street has demonstrated exceptional performance with a suite of highly competitive home loans, savings accounts, and credit cards.”

Australia’s Best Regional Customer Owned Bank: Regional Australia Bank “With a strong presence in regional New South Wales and an extensive range of products, Regional Australia Bank has shown exceptional service and value to its customers.”

Australia’s Best Credit Union: Police Credit Union “Police Credit Union was awarded Australia's Best Credit Union for its outstanding offerings in home and personal loans. Securing six awards over the past year is a testament to their quality and innovation.”

Australia’s Best Major Bank: Commonwealth Bank “For those who prefer to bank with one of the 'Big 4' Commonwealth Bank has been named Australia's Best Major Bank. Winning seven Mozo awards across various banking categories shows their prowess in delivering top-tier banking services." 

Learn how Mozo experts decided the winners, or read the media release in full.

Australia's Best Banking Apps 2024

In the digital banking space, Mozo's Experts Choice Awards for Banking Apps identified leaders in user experience and functionality. 

Australia's Best Banking App: Westpac "Westpac's app excelled in offering the richest set of features, providing users with superior visibility and control over their banking needs."

Exceptional Banking Apps: 

  • ANZ Plus: “The seamless integration with popular payment systems and strong customer support options clearly differentiate the ANZ Plus app from the standard ANZ app.”
  • Up: "Up's banking app definitely caters to those who appreciate aesthetics, with a video-game like interface that has the potential to redefine the digital banking experience."
  • Westpac regional brands BankSA, Bank of Melbourne and St.George: "The Westpac regional brands’ banking apps each use the same innovative technology to provide banking customers with an intuitive digital banking experience to suit a diverse customer base.”
  • Commonwealth Bank: "CommBank's banking app provides a variety of user-friendly features that simplify on-the-go money management for users seeking intuitive control over their finances."

Learn how Mozo experts decided the winners, or read the media release in full.

As a part of Mozo’s commitment to making your money count for more, each month we “roundup” the rate changes, key banking trends and money moves in the Australian personal finance market. 

If you’d like to see the analysis in full once it’s released, you can subscribe to receive the Mozo Banking RoundUp here.

Disclaimer: Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice. Target Market Determinations can be found on the provider's website. While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo. 

* commissioned a nationally representative consumer research survey via Researchify, surveying 2,554 Australians, aged 18 years and over, from 12th January to 2nd February 2024.