Why do banks offer better interest rates on savings accounts than the official RBA cash rate? This includes personal and business accounts with no fees and no conditions, other than that you earn a lower marginal interest rate on balances above certain values. Presumably the bank can borrow all it wants at the official rate.

For example, the current RBA rate is 4.35%. Macquarie bank offers a personal saver account with an interest rate of 5.00% and a business saver account with an interest rate of 4.65%. Both are for balances up to $1 million. This does not appear to be a temporary deal - for example the business saver account had a rate of 4.75% in November 2023.

Does not offer temporary?

No. Permanent. You get an even better deal for the first few months.

I was going to answer this myself but ran the question past 1stborn who got close to a perfect mark in YR12 economics, has met the RBA Gov, and is about to start an economics degree. Her explanation was similar but more concise than what I would have said.

They can pay you 5% interest on your deposit, and lend it to someone else at a higher rate.

I get 5.5% with ING savings maximiser.

$100K limit

Gordon wrote on Feb 3^rd, 2025 at 10:31am:

I was going to answer this myself but ran the question past 1stborn who got close to a perfect mark in YR12 economics, has met the RBA Gov, and is about to start an economics degree. Her explanation was similar but more concise than what I would have said. They can pay you 5% interest on your deposit, and lend it to someone else at a higher rate.

Or they can borrow at the reserve rate of 4.35% and do the same.

freediver wrote on Feb 3^rd, 2025 at 2:28pm:

Gordon wrote on Feb 3rd, 2025 at 10:31am: I was going to answer this myself but ran the question past 1stborn who got close to a perfect mark in YR12 economics, has met the RBA Gov, and is about to start an economics degree. Her explanation was similar but more concise than what I would have said. They can pay you 5% interest on your deposit, and lend it to someone else at a higher rate. Or they can borrow at the reserve rate of 4.35% and do the same.

They get most of their funds from means other than the fed. Deposits, interbank lending.

Gordon wrote on Feb 3^rd, 2025 at 6:57pm:

freediver wrote on Feb 3rd, 2025 at 2:28pm: Gordon wrote on Feb 3rd, 2025 at 10:31am: I was going to answer this myself but ran the question past 1stborn who got close to a perfect mark in YR12 economics, has met the RBA Gov, and is about to start an economics degree. Her explanation was similar but more concise than what I would have said. They can pay you 5% interest on your deposit, and lend it to someone else at a higher rate. Or they can borrow at the reserve rate of 4.35% and do the same. They get most of their funds from means other than the fed. Deposits, interbank lending.

Whatever is cheapest? Or do they prefer to seek out the most expensive and inconvenient option? They are banks after all. They probably wouldn't mind either way, right?

Competition for deposits is part of the story.

It has always been how it works, the RBA rate was always a base rate and a guide. The banks supposedly compete against each other based on what they are offering.

There have been many instances where the RBA has reduced loan rates and the Banks refused to follow or only partially followed. They called this deregulation. The banks can do what they like.

If they are giving better than RBA rates to their depositors it means that they are also charging higher rates to their lenders. i.e. Home loan rates remain higher than the RBA rate.

Banks should be running our Economy. Not Politics.

Quote:

If they are giving better than RBA rates to their depositors it means that they are also charging higher rates to their lenders

Obviously they are, but it has nothing to do with the different rate they offer on deposit accounts.

Jasin wrote on Feb 4^th, 2025 at 7:44am:

Banks should be running our Economy. Not Politics.

Do you know how often the banks are bailed out by the people because they are on the doorstep to bankruptcy ?

Banks can barely run banks. It was only a few years back where a banks royal commission caught the banks systemically ripping off their customers - That is all of them. The lot.

Not only do they lack the ability to run an economy they lack the integrity to be trusted to run an economy.

freediver wrote on Feb 4^th, 2025 at 7:47am:

Quote: If they are giving better than RBA rates to their depositors it means that they are also charging higher rates to their lenders Obviously they are, but it has nothing to do with the different rate they offer on deposit accounts.

It was aimed at informing the people who continually whine about high home loan rates.

It is related to what they offer on their deposit rates. The loans have to make a profit on the money they have, if they are paying more on their deposit interest they have to market this money at a rate that will both pay that interest and make a profit above that. The two are tied together.