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ASB economists say term deposit rates are now slightly above the average level recorded over the past 20 years - but still below the levels savers received in the early 2000s

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ASB economists say term deposit rates are now slightly above the average level recorded over the past 20 years - but still below the levels savers received in the early 2000s

ASB economists say term deposit rates may now be at their peak.

In a Term Deposit Report, ASB senior economist Chris Tennent-Brown said term deposit rates have returned to levels above where they have averaged over the past 20 years "and are expected to settle around current levels this year".

He said despite these “above average” rates, inflation remains stubbornly high.

"Inflation has lifted more than term deposit rates, and in doing so continues the challenge for savers trying to get their money in the right place."

As of the March quarter annual inflation was 6.7%. The Reserve Bank (RBNZ) has been increasing interest rates strongly through hiking the Official Cash Rate (OCR), lifting it from just 0.25% as of early October 2021 to 5.5% now.

Retail interest rates, which sank at the time of pandemic, have risen similarly. And savers have responded. 

RBNZ monthly deposit figures show that between the onset of the pandemic in early 2020 and mid-2021 the amount held by kiwi households in term deposits dropped from over $100 billion to a little over $80 billion. But with the more recent surge in interest rates, savers have piled back into term deposits. As of April, NZ households had about $112.5 billion in term deposits - which was a rise of some $26 billion in the past 12 months. 

Tennent-Brown said all term deposit rates are lower than annual CPI inflation, which is "expected to remain high, eroding the purchasing power of returns, even before tax is considered".

"ASB economists now see the current 5.5% OCR level as the top for this cycle, and that has implications for our term deposit outlook, which similarly may be at a peak. The RBNZ looks done, with its inflation forecasts released in May very marginally lower, and inflation back within the target band from mid-2024.

"If inflation eases over the subsequent years as ASB and the RBNZ expect, it will be a welcome development for savers, particularly if term deposit rates remain near current levels."

Tennent-Brown said term deposit rates are now slightly above the average level recorded over the past 20 years.

"Above average sounds OK – but it’s below the levels savers received in the early 2000s, and we are not expecting rates to return to those levels seen prior to the global financial crisis.

"From the record lows recorded during the pandemic, term deposit rates have now returned to levels slightly above the long-term (20-year) average. From here, our view is that interest rates for most term deposits will stay around current levels, rather than press onwards to the higher levels we have seen at times over the past 20 years."

He said ASB economists expect inflation to remain high, running above 3% over the next year, and above 2.5% over 2025/26.

"As a result of the inflation outlook, despite slowing economic growth, interest rate cuts are a way off in our view."

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So they might be approaching neutral if you look longer term (i.e 50-100 years) and what we've just experience, could turn out to be a one in a hundred-year phenomenon (no guarantees of course!).

Short term rates around 5% is pretty normal in the history of finance. 

Short terms rates at 0% is not.


The old blanket statement “eroding purchasing power”, depends entirely on what you are purchasing. 


Which ever way you look at it, savers are, after gaining interest on their lendings to the banks, able to buy less an less oranges, meat chops, bread or petrol, or whatever.

I totally 'get' that banks like to lend my money out at rates at or above the rate of inflation, and to offer savers as low a rate as they can get away with, in order to make some handsome profits. 

Just please don't tell us the term deposit rate is 'high', 'generous' or 'as good as it's going to get'!

Whatever the facts of the matter are, it seems to the mug TD depositor that banks have a wonderful collegial approach to this supposedly competitive market.


In any case they are a hell of a lot better than the 1.6% they were 12 months ago. All depends on inflation from here, and groups like the 50,000 teachers demanding 12%  + 5k cash wage rises.