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We compare term deposit rates here with those in Australia and wonder if the Aussie offers will become NZ's future

Personal Finance
We compare term deposit rates here with those in Australia and wonder if the Aussie offers will become NZ's future

Our friends at the excellent Australian service YieldReport yesterday ran a review of the 'best' bank term deposit rates available from banks in that market.

This has prompted us to update our own review, especially as many market commentators think the RBNZ is about to signal an easing bias for New Zealand's Official Cash Rate on Thursday.

Our review clearly shows New Zealand still has a steeper yield curve than across the ditch, and our 'best rates' are higher by between +20 to +50 bps, and better as the term lengthens.

This shouldn't be much of a surprise, given the policy rates are +50 bps higher here than there.

But if Australia holds it rate, as many observers predict, and New Zealand cuts twice back to the 2% rate prevailing in Australia, then today's view may in fact be an ability to look into the future to see what may happen to Kiwi term deposit offer rates.

New Zealand's banking regulator started its core funding standards and requirements much earlier than their Aussie counterparts, and this essentially means New Zealand banks have already adjusted to a higher level of local and longer funding of their loan books.

Further, household deposit growth has been relatively stronger here than there, filling bank funding requirements and helping the core funding standards.

So perhaps it is something of a surprise that our rates are so consistently higher.

More so, perhaps, as YieldReport say there is a growing chance banks there will again be competing harder for local term deposits, something they were doing as recently as a year ago.

Perhaps the future will be one of declining New Zealand rate offers for term deposit savers (remembering that call savings account interest rates have all but evaporated, except for bonus savers and some notice saver accounts), and rising Australian offers.

Term deposit rate 'harmonisation' may be a 2016 outcome, who knows.

If this analysis strikes a chord for you, you can at least see what the 'benefits' could be by moving before the banks move again, and the costs if you don't.

Of course, there is more to an investment decision than simple offer rates. You may well be interested in how interest is paid or compounded. The more often it is, the lower the rate offer.

In addition, you should know that some other specialist banks also offer term deposits, some with rates higher than set out in the above graphic.

ICBC, Kookmin Bank, the Bank of India, and the Bank of Baroda are also banks that have local offers that may seem attractive compared with our main retail banks.

And of course there are many non-bank institutions - some with investment grade credit ratings (UDC, Liberty Financial and Medical Assurance Society) - that also should be assessed. Use our term deposit pages to start that review.

Falling interest rates are especially tough on savers. In a falling market, the balance of earnings availability and the term of the rate offered can involve stressful choices. Using term PIEs can also give a small extra after-tax effect.

Our unique term deposit calculator can help quantify what each offer will net you.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

6 Comments

Another essential difference between deposits made in NZ and those made in Oz that may be considered when making deposit decisions is the risk factor: a deposit made with a NZ bank/deposit taker is not guaranteed, whereas a deposit made with an Australian bank/deposit taker is guaranteed, up to $250k per customer per bank.

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just wonder if BoQ or one of the others would become active and try to sign up NZ depositors. the big 4 wont as they want the funds for their subsidiaries

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so the moral of the story is those that save are bad bad people and they deserve to have their money taken off them to help the lenders and borrowers
http://www.cnbc.com/2016/03/08/that-was-quick-cyprus-exits-bailout-with…

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Savers are horrible people who should instead consume recklessly and instead build up unsecured consumer debt. That goes double for retirees.

It's curious that Kiwi Capital Funding bonds have a face coupon of 6.6% but term deposits and savings accounts are in the same boat but often receive less than 2%. The return doesn't match the risk.

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Sending money to AUS bank would make sense as the RBA takes the stance of protecting depositors FIRST, from the shenanigans of the banks that do not incorporate fiduciary responsibility into their policies. The RBA, along with all other intelligent nations has a guarantee to the depositors who put their hard earned money into banks AT SAFE KEEPING at currently a pittance of interest. You just would have to be prepared to play the currency exchange game for monies going into and out of NZ.... along with the BANKS exorbitant fees for doing same ( i.e for punching one button on the computer in order to transfer it they take around 2-3%!!) Read about record profits in the banking industry lately.
It never ceases to amaze me how the the uneducated brass at the rbnz totally disregards NZ depositors and the financial integrity of the NZ banking system. Just shows how backward their thinking is and not to rely on anything that comes out in a press release from them.
The policy of the rbnz in this respect is what is known as 'third world country' banking.

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While New Zealanders' deposits are not guaranteed a decision to compensate or not to compensate those depositors will, in my view, be a political decision. Can you imagine the political consequences if any Government decided not to compensate those depositors when most Countries do.

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