What will savings rates be like in 2026?

As Australia approaches 2026, the outlook for savings rates is marked by an expectation of further rate cuts by the Reserve Bank of Australia (RBA). After a period of aggressive hikes from 2022 to mid-2025 to combat inflation, and a series of cuts beginning in early 2025, the RBA's focus is shifting toward supporting economic growth. This is a contrast to the high-yield environment savers enjoyed in 2024 and early 2025.

Key factors influencing savings rates in 2026

• RBA cash rate cuts. The most significant factor for savings rates is the RBA's cash rate. The Big Four banks are predicting the cash rate to fall to around 3.10% to 3.35% by early 2026, while Westpac suggests the cash rate will bottom out at 2.85% by mid-2026. This would follow a series of small, incremental cuts (likely 0.25%) that began in February 2025.
• Inflation and economic growth. The RBA's primary goal is to return inflation to its target range of 2-3%. Recent data shows that this goal has been met, with the latest quarterly inflation figures revealing a sharp decrease to 2.1%. This places headline inflation at the very bottom of the RBA's target range. While this is a positive development, economic forecasts from KPMG and Ai Group suggest that despite easing inflation, economic growth is still slightly weaker than desired. GDP growth is only expected to pick up modestly to 2.25% in 2025/26, with household consumption also recovering slowly. This combination of low inflation and sluggish growth provides a strong justification for the RBA to continue easing monetary policy, likely through further cash rate cuts, to stimulate the economy.
• The job market. Unemployment is expected to rise slightly, with the Treasury forecasting it to reach 4.5% during the 2025/26 financial year. A softening labor market could be a key trigger for the RBA to lower rates to stimulate the economy and prevent a sharper downturn.

Possible scenarios for savers in 2026

• Scenario 1: gradual rate cuts. Most likely, the RBA will continue to cut rates incrementally throughout 2026. Savings rates would fall in line with these cuts, but likely not as sharply. Savers will see a decrease in returns, but high-interest savings accounts from challenger banks and smaller institutions may continue to offer more competitive rates for a time.
• Scenario 2: an extended pause. If inflation proves stickier than expected or the economy shows unexpected resilience, the RBA could pause its rate-cutting cycle in 2026. In this case, savings rates would stabilise at their new, lower levels.
• Scenario 3: rate hikes. This is the least probable scenario. Only a significant and unexpected resurgence of inflation would lead the RBA to consider raising rates again, which is not currently supported by major economic forecasts.

The most probable outcome for 2026 is that savings rates will continue their downward trajectory as the RBA works to support the economy. Savers should be prepared for a lower-return environment compared to the previous two years.

What can savers do right now?

• Regularly reviewing and comparing savings accounts can help secure the best available rates as the market shifts.
• Savers might consider locking in higher rates now with term deposits before further cuts take effect, using term deposit laddering to balance access and returns.
• It’s important to maintain an emergency fund in easy-access accounts to ensure liquidity even when rates are low.
• Keep an eye on inflation and RBA updates to adjust savings strategies as needed.
• For those seeking higher returns, exploring alternative investment options beyond traditional savings accounts, such as investing in ETFs or shares, may be worthwhile.