The big four banks have quietly taken the knife to savings account interest rates during the summer months, with many customers now earning less than 1 per cent on their cash held in the bank.
Commonwealth Bank, National Australia Bank and Westpac have all sliced some of the rates paid on their online savings accounts during January, following a cut from ANZ Bank in December, as competition between banks for household deposits eases.
But as banks face fierce public scrutiny, cuts by three of the four banks were designed in a way that is likely to save the banks money, but attract less public attention.
That is because CBA, NAB and ANZ all reduced "base" rates, which are paid to long-term customers, while raising "introductory" rates, which are used in marketing materials but only paid to customers for the first three to five months after they open an account.
The effect of such a tactic is to lower the rates paid to loyal customers, while minimising the decline in advertised headline rates, which take into account both the "base" and "introductory" offers. Base rates for online savers are now just 0.5 per cent at ANZ Bank, and 0.8 per cent for the other three majors.
The cuts come as competition between banks to attract deposits has eased, because the slowing mortgage market means there is less need for banks to aggressively chase household savings, a key source of funding.
Director of marketing and communications at comparison website Mozo, Kirsty Lamont, slammed the cuts as a "cynical" move that would make it harder for households to save.
"Three major banks are employing bait and switch tactics by jacking up introductory offers, while hacking away at base rates. Unlike the bank's advertised rates, base rates tend to fly under the radar but this is where savers feel the most impact," Ms Lamont said.
"The onus is on savers to move their cash out after the introductory period expires or be punished by these miserly rates."
ANZ appears to have triggered the cuts when it last month lowered the base rate on its Online Saver by 0.3 percentage points to just 0.5 per cent. At the same time, it also boosted the introductory "bonus" rate by the same amount, leaving its total headline rate unchanged at 2.55 per cent.
In the new year, CBA cut base rates on its NetBank Saver account by 0.2 percentage points to 0.8 per cent, while also lifting its introductory rate. NAB also lowered its base rate on the iSaver to 0.8 per cent, while lifting its introductory by the same amount.
Westpac left base rates on its eSaver unchanged at 0.8 per cent, but it has lowered the introductory rate by 0.1 percentage points to 1.61 per cent.
Banks defended the changes, saying they frequently reviewed rates in response to market conditions.
ANZ said the bank regularly reviewed its funding requirements in response to "credit growth expectations and competitive pressures," and customers seeking higher returns could consider term deposits.
CBA said its interest rates were frequently reviewed and reflected market conditions.
"We believe our deposit products continue to provide value to customers," she said.
NAB also said it regularly reviewed deposits products to "balance the needs of all of our customers and stakeholders, and take into account economic and market conditions."
Westpac confirmed its changes, which took effect last week, and said the bank was committed to "competitive" savings rates.
The cuts come as bank profits are predicted to grow more slowly in the year ahead, amid predictions of slowing credit growth and rising charges for bad debts.
