Australia’s banks could be set to lift rates out of cycle with the Reserve Bank in the not-too-distant future, one economist has claimed.
NAB’s chief economist Alan Oster said funding costs are starting to rise once more, which could force Australia’s banks to move their rates well above the official cash rate.
“What’s happening now is everyone is competing for deposits in the local market. So you have banks like U-Bank offering rates way above the cash rate, which is really unusual,” he said.
“So, in that vein, depositors are getting a good deal, but we are seeing funding costs rising a little bit again.”
If Australia’s banks do opt to move out of cycle with the Reserve Bank within the next month or so, it won’t be the first time they have done so, with all of the big four lifting their rates above the RBA in February.
Their decision to break ranks with the RBA in February this year finalised the divorce between the bank’s interest rates, and the official cash rate.
CBA retail banking services executive Ross McEwan said the official cash rate was now just one factor in the bank’s total funding costs, and the bank has been subject to sustained increased in outlays for wholesale and deposit funding.
“The Commonwealth Bank believes Australian banks should continue to price sensibly, taking into account factors both on and offshore, rather than experience similar problems to those that many banks overseas have experienced,” Mr McEwan said.