How a year of RBA swings rewrote the term deposit market

Twelve months ago, an adviser locking a client into a one-year term deposit was chasing a shrinking number, and the sensible move was to take whatever rate was on offer before the next cut. That advice has aged badly.

Three RBA hikes later, term deposit rates across Australia have pushed past 5 per cent at the top end, and the gap between the best and worst offer on the market is wider than at any point in the cycle.

For advisers with clients holding cash or defensive allocations, that gap is now doing more work than the headline rate itself.

Around $320 billion sits in term deposits across the banking system, spread across more than 40 institutions. Over the past 12 months that pool has been repriced unevenly, and the divergence between providers is arguably the bigger story than the level of rates itself.

The RBA’s path

In June 2025 the cash rate target sat at 3.85 per cent and was still being cut. It fell further, to 3.60 per cent, before a resurgence in inflation and an oil price shock triggered three consecutive 25 basis point hikes in 2026, taking the cash rate to 4.35 per cent, a net rise of 50 basis points over the year.

Term deposit pricing moved by more than that. The RBA’s own benchmark for retail term deposits, the average one-year rate on $10,000 deposits, climbed from 3.70 per cent in June 2025 to 5.05 per cent by May 2026.

That is a 1.35 percentage point jump, well beyond the cash rate move, and a sign of how hard banks have been competing for deposit funding rather than simply passing through RBA decisions.

Term deposit rates rose, and spread out

Comparing advertised one-year rates across institutions in June 2025 and June 2026 tells the same story from another angle. The average rate rose from 3.83 per cent to 4.75 per cent, and the median jumped further, from 3.90 per cent to 5.15 per cent.

Dispersion widened sharply too. The gap between the highest and lowest advertised rate grew from 2.30 percentage points to 3.45, and the spread between the top and bottom quartiles roughly doubled. This was not a uniform re-rating. Some providers moved decisively; others held back, pulling the market apart rather than lifting it in lockstep.

Most providers lifted their one-year rate by well over a percentage point. ANZ, Great Southern Bank and Beyond Bank were among the biggest movers, each adding roughly 1.5 to 1.65 percentage points, with Macquarie, RACQ Bank and several regional and mutual players close behind.

Not everyone followed the herd: HSBC cut its one-year rate by half a percentage point over the period, while Bank of Melbourne and Teachers Mutual Bank trimmed theirs by 0.45 points.

Even in a rising rate market, some institutions are managing their own funding needs rather than chasing the headline rate.

The share battle behind the numbers

That spread is not accidental. Macquarie has spent several years taking household deposit share from the major banks and is now applying the same approach to term deposits, a market it has historically under-served. It holds around $4 billion in term deposits, about 3.5 per cent of its household deposit book as at the end of May, and is rebuilding its offer around no automatic rollovers, no break fees and a simpler digital process.

Term deposits carry very different weight across the majors. Commonwealth Bank holds 31 per cent of its deposits in term products, against 19 per cent each for ANZ and NAB and 17 per cent for Westpac, according to Jefferies. The difference in funding mix helps explain why some banks moved harder on price than others.

APRA data show Commonwealth Bank remains the largest deposit taker overall, with a 26.5 per cent share, even as its deposit book went backwards in May. Macquarie has added 1.32 percentage points of deposit share over the year, while ANZ lost 37 basis points.

Canstar recently reported 13 banks lifting rates in a single week, by an average of 0.28 percentage points, pushing the market’s top one-year rate to 5.5 per cent.

What it means for clients

For advisers reviewing client cash and defensive holdings, the practical takeaway is that provider selection now matters more than at any point in this cycle.

With term deposit rates in Australia diverging by more than 3 percentage points at the one-year mark, and quartile spreads roughly doubled from a year ago, the cost of defaulting to an existing relationship rather than comparing across the market has grown accordingly.

The forces behind the dispersion are structural rather than temporary: a challenger reshaping its funding book, majors with different reliance on term deposit funding, and an RBA path that remains uncertain from here.

The combination argues for treating term deposit selection as an active decision to revisit at each maturity, not a rate to set and forget.