Will the RBA cut interest rates in December?

The RBA’s final meeting of 2019 is only a few days away, and while there’s been some chatter about a potential cut, markets are fairly confident that the cash rate will be kept on hold in December, leaving February as the more likely date.

“The RBA observed that their June-July double act caused a bit of consumer stress. I think they’d be reluctant to risk upsetting the apple cart in the lead-up to Christmas,” said Mozo’s banking expert, Peter Marshall.

How is the economy faring?

While the wheels haven’t exactly come off, things aren’t running too smoothly either. Since the RBA began cutting interest rates back in June, it’s had to contend with seesawing employment figures and an inflation rate that remains anchored well below its target range of 2-3%. 

At the same time, household debt has reached record highs, and with RBA Deputy Governor, Guy Debelle recently talking down the prospect of a lift in wages, many Australian households are finding themselves in an increasingly vulnerable position.

All this very nearly led the RBA to break with its usual wait-and-see approach this month, with minutes from its last meeting revealing the board seriously considered bringing official interest rates down to 0.50% in November.

How low will interest rates go?

With the cash rate currently sitting at 0.75%, the RBA has three more cuts in the chamber before it hits the zero mark. But the chances that it will drop even further are extremely slim.

At a recent Australian Business Economists event in Sydney, RBA Governor Lowe left no doubt about his position on negative interest rates, stressing that while several countries around the world have adopted the unconventional policy, Australia is unlikely to follow suit.

“It has become increasingly apparent that negative rates create strains in parts of the banking system that can impair the ability of some banks to provide credit,” he said.

“In addition, there is evidence that they can encourage households to save more and spend less, especially when people are concerned about the possibility of lower income in retirement.”

Surprisingly, Dr Lowe revealed he isn’t particularly eager to resort to quantitative easing either, ruling it out as a possibility until interest rates reach at least 0.25%, and even then limiting its scope to the purchase of government securities rather than private assets. 

"There may come a point where QE could help promote our collective welfare, but we are not at that point and I don't expect us to get there," he said.

What will banks do when the RBA does cut?

So if the RBA is likely to lower official interest rates early next year, how can we expect banks to respond?

“I think it will be pretty similar to the changes we saw in the last cut, where somewhere around half of the 25 basis point cut will get passed onto borrowers, and probably about the same for depositors,” said Marshall.

“Deposit rates are so low that banks are struggling to attract deposit funds now. They need to make sure that they are getting new deposits in the door to make up for the funds that they’re losing.”

So while it’s a bit hard to get excited about savings accounts at the moment, there are still a few options out there that offer rates of at least 2.00%. To help you find one that’s right for you, head over to our savings accounts comparison page, or have a quick browse of the selection below.

Savings account comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 272 savings accounts.
Last updated 13 October 2024 Important disclosures
  • Savings Account

    5.35% p.a. (for $0 to $250,000)

    4.75% p.a.(for $0 to $1,000,000)

    Yes up to $250,000

    Bonus variable rate is available for the first 4 months.

    Enjoy a high interest savings account with no account keeping fees to pay. Save up to 10% on eGift cards at over 50 retailers with Macquarie Marketplace. Multiple 2024 Mozo Experts Choice Award winner.

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  • Savings Maximiser

    5.50% p.a. (for $0 to $100,000)

    0.55% p.a.(for $0 and over)

    Yes up to $250,000

    Deposit $1,000 into a personal ING account, make 5 eligible transactions with a linked Orange Everyday account and grow the balance each month.

    Great variable rate every month when you grow your balance each month in addition to other eligibility criteria. No ING fees to pay. Save even more with ING Everyday Round Up. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^

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  • MoneyMAX Account

    No Current Offer

    4.70% p.a.(for $1 and over)

    Yes up to $250,000

    Unlimited access 24/7 via Banking App, Phone & Internet Banking. Interest is calculated daily and paid monthly. No transaction fees or monthly service fees. No minimum balance or withdrawal restrictions. Online access only.

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  • Bonus Saver

    5.00% p.a. (for $0 and over)

    1.00% p.a.(for $0 and over)

    Yes up to $250,000

    Bonus interest for the first four months from the account opened date. No minimum balance required. No monthly or ongoing fees or withdrawal penalties. Manage your money easily via phone or online banking or via the BCU Bank app.

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  • Savings Accelerator

    3.55% p.a. (for $0 to $50,000)

    2.85% p.a.(for $0 to $50,000)

    Yes up to $250,000

    New customers receive an introductory bonus 0.70% p.a. variable kick starter rate for the first 4 months on balances up to $500,000.

    Enjoy the flexibility to access your funds with no monthly deposit requirements or lock-in terms. No ING fees to pay. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^

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^See information about the Mozo Experts Choice Savings Account Awards

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