Significant Funds in Australian Accounts Earning No Interest

Billions of dollars in Australian bank accounts are not accruing interest, despite multiple cash rate hikes this year. Consumer advocates Canstar reported that the major banks raised their maximum savings rates by only 0.20 to 0.25 percent, leaving many customers unaware of the requirements needed to earn bonus interest. A 2023 report indicated that approximately 70 percent of customers may not meet these conditions.

The Commonwealth Bank revealed it held nearly $122 billion in accounts earning no interest, while Westpac, NAB, and ANZ reported similar figures of nearly $82 billion, $67 billion, and $61 billion, respectively. Canstar's analysis highlighted that recent rate increases were applicable only to select savings products with strict conditions. Without meeting these requirements, customers revert to a base rate of 0.10 percent.

Sally Tindall from Canstar emphasized the need for banks to proactively inform customers about their account conditions, suggesting that alerts via email or text could help prevent missed opportunities for earning interest. The Australian Competition and Consumer Commission's 2023 Retail Deposits Inquiry found significant variability in bonus interest account conditions across banks, with some requiring minimal deposits while others demanded higher monthly contributions.

As Australian savings in these accounts have doubled to around $300 billion from mid-2019 to mid-2023, the inquiry noted that over 70 percent of accounts did not receive the bonus interest due to unmet conditions. With another cash rate increase expected following the Reserve Bank of Australia meeting, inflation has risen to 4.3 percent, exacerbating mortgage stress for nearly two million families, as reported by Roy Morgan. The anticipated rate hike could push the percentage of mortgage holders at risk of stress to a record high of 33.1 percent.