Term deposit competition likely to continue, says expert

Australia's banks appear set to continue competing for term deposits through strong term deposit interest rate offers, an expert has predicted.

Don Stammer, chairman of Praemium, the investment committee of INGIM's Multi Strategy Group, noted that an important legacy of the global financial crisis was to force Australian banks to reduce their dependence on short-term borrowings from international money markets.

"They are now competing strongly for at-call and term deposits from within Australia to increase their funding base," he commented in a column for the Australian.

Mr Stammer forecast that this competition is likely to continue now that the banks have restored their profitability "more or less to pre-crisis levels".

Favourable rates and other bank incentives have encouraged a growing number of Aussies to compare term deposits and consider switching provider. Mr Stammer was commenting after the Reserve Bank recently released one of its twice-yearly Financial Stability Reviews.

He said that the review painted a broadly positive picture for Australian investors by referring to the improving health of global finance and the relatively strong condition of the Australian financial system.

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