This Week in Finance: 9 December 2022

This week in finance, it’s been all about rising: the rising cash rate (who’d have thought!), rising demand for electric vehicle and solar system loans, and rising airfares.  

We also take a look into how the big four banks are moving in light of the most recent cash rate rise, as well as checking out the nitty-gritty of household spending and saving. 

Read more on all these top money stories from the past week below.

---

Cash rate increases by another 25 bps

Starting on a very familiar foot, the Reserve Bank of Australia (RBA) has once again decided to increase the cash rate target by another 25 basis points to 3.10%.  

RBA Governor Philip Lowe said in a statement released on Tuesday that inflation in Australia is “too high”- inflation is at 6.9% over the year to October, a slight fall from 7.3% the previous month.

That marks the 8th consecutive month where the cash rate has been increased, and more rate rises could potentially be on the cards next year, as Governor Lowe said Australians should expect inflation to rise further.  

“A further increase in inflation is expected over the months ahead, with inflation forecast to peak at around 8 per cent over the year to the December quarter,” he said.

“Inflation is then expected to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand. 

“Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank’s central forecast is for CPI inflation to decline over the next couple of years to be a little above 3 per cent over 2024.

“High inflation damages our economy and makes life more difficult for people. The Board’s priority is to re-establish low inflation and return inflation to the 2–3 per cent range over time.”

How the big four banks are stacking up

With the cash rate target now at 3.10%, a full 300 basis points higher than it was in April 2022, people are keeping their eyes on the big four banks to monitor how they are dealing with the increases. 

In terms of mortgage rates, people holding variable-rate mortgages with any of the big four banks will be looking at around 7.50% p.a for a standard variable rate, according to analysis by RateCity.

Big four banks – new advertised mortgage rates, post-December RBA rate hike

	Basic variable	Discounted variable	Standard variable
CBA	4.87% p.a.	4.82% - 6.49% p.a.	7.55% p.a.
Westpac	4.74% p.a. for 2 years then 5.14% p.a.	6.19% p.a.	7.48% p.a.
NAB	4.99% p.a.	6.67% p.a.	7.52% p.a.
ANZ	4.84% p.a.	5.99% p.a.	7.39% p.a.

Source: ratecity.com.au

On the savings front, the big four banks are still offering lower rates than many smaller or digital banks. The current frontrunner for savings account interest rates is ING with a total rate of  4.30% p.a.

Commbank is currently the only one of the big four to have increased the savings rates across all three savings accounts. 

RateCity.com.au research director, Sally Tindall, said, “CBA has gone above and beyond this month with hikes to all key savings accounts, many of which are more than what the RBA prescribed.”

“It’s fantastic to see Australia’s biggest bank leading the way with regards to savings hikes, because it will force others to follow in its footsteps.”

Big four banks savings rates post-Dec rate announcements

	Bonus saver(max ongoing rate)	Online saver	Other
CBA	3.25% p.a.	3.75% p.a. for 5 mths then 1.60% p.a.	-
Westpac	3.75% p.a.	3.50% p.a. for 5 mths then 0.85% p.a.	Spend&Save – 4.35% p.a. (ages 18-29)
NAB	2.75% p.a.	3.50% p.a. for 4 mths then 1.10% p.a.	-
ANZ	2.25% p.a.	2.15% p.a. for 3 mths then 0.60% p.a.	Plus Save – 3.50% p.a.

Source: ratecity.com.au

---

Going for green: the rise in electric vehicle and solar loans  

Aussie businesses are going for green, with loans for EVs and rooftop solar systems seeing an increase of 900% and 600% respectively since 2020. 

New data from NAB shows the demand for loans to fund greener alternatives has soared as Australian businesses race to cut costs and emissions.

NAB’s group executive for business banking Andrew Irvine suggested businesses are going green in the face of rising electricity and fuel prices, as well as to meet climate and sustainability targets. 

“I think we’re seeing a real step change in the focus of Australians and Australian business into transition,” Mr Irvine said.

“Right across the country, we’re seeing investments in everything from solar panels to electric cars to sustainable on-farm practices and technologies that reduce costs, reduce carbon emissions and, importantly, build resilience to climate change.

“Our customers know there are significant economic and environmental opportunities in reducing their carbon footprint, with 43% of businesses telling us they either have in place or plan to develop a net zero carbon emissions plan.”

Meanwhile, the latest monthly car sales data from the Federal Chamber of Automotive Industries (FCAI) show a massive increase in sales for battery electric vehicles.

According to the data, the Tesla Model Y is now the 10th most commonly bought car in Australia.

“During September 2022, 7,247 battery electric vehicles were sold, more than hybrid and plug-in-hybrid combined (5,141). Year to date, 21,771 battery-electric vehicles have been sold,” FCAI Chief Executive Tony Weber said.

---

Household savings ratio declines by 1.4% 

Marking the fourth consecutive quarterly decline, the household savings ratio has fallen from 8.3% to 6.9% in the September 2022 quarter, according to the Australian Bureau of Statistics (ABS). 

During COVID-19 lockdowns, the household savings ratio, a measure of the % of take-home income stashed away by Australian households, reached as high as 23.6%.

“The household savings ratio continued to decline this quarter, moving towards pre-COVID-19 pandemic levels. Higher levels of spending and increases in interest payable on dwellings detracted from household saving compared to the June quarter," ABS Head of National Accounts Sean Crick said. 

Meanwhile, October 2022 was the 20th consecutive month of increased through-the-year total household spending, increasing by 20.7% compared to the same time last year. 

PRD Chief Economist Dr Diaswati Mardiasmo told Savings.com.au that households are having to dip into their savings for essential items to keep up with the rising cost of living. 

Dr Mardiasmo predicts that the household savings ratio could go below 5.0% in the next few months. 

“To be honest, it’s quite a catch-22 at the moment. On the one hand, going back to a household savings ratio of 5% means that we are going back to the pre-COVID-19 economy, which was a strong economy to begin with,” she said.

“On the flipside, it can be quite concerning to see how fast our household savings ratio has declined within the space of eight-to-nine months.”

Source: RBA, ABS via savings.com.au

---

Demand for airfares soar in lead up to Christmas

People are well and truly back into the swing of things as demand for airfares has increased well above pre-pandemic levels.

Unfortunately for travellers, this means the cost of flying has soared as well. 

According to the ACCC’s Airline Competition in Australia report released Tuesday, the average revenue per passenger was 27% higher in October 2022 than in October 2019.

“Airfares have risen due to strong demand for travel and constrained supply as airlines have scaled back their schedules in response to high jet fuel costs and operational challenges,” ACCC Commissioner Anna Brakey said.

The report also shows that while airlines are optimistic about the increased number of passengers, they will still be operating at a reduced capacity. 

“We accept that the airlines are still experiencing some pandemic-related resource challenges, but the ACCC will be monitoring them closely to ensure they return capacity to the market in a timely manner to start easing pressure on airfares,” Ms Brakey said.  

Check back next week for another wrap on the week’s biggest finance stories.

Read our latest posts

• 10 Tips: How To Save Money On Holiday Flights Before Christmas
• How Much Does A Full Home Renovation Cost?
• The Top 11 Money Apps in Australia
• How Much Does a Swimming Pool Cost in 2024?
• Interest Rates vs. Comparison Rates: What's The Difference?
• How To Escape Credit Card Debt