While Australian interest rates are currently at the lowest level on record, with some forecasting they’ll go even lower, it hasn’t stopped Australians from jumping back into term deposits, which hit the highest level on record last month.
According to monetary aggregates data released by the ABS on Monday, the value of term deposits at Australian banks rose to $548.1 billion in September, surpassing the previous record peak of $547 billion struck in August 2013.
In percentage terms, the annual growth in deposits now stands at 8.9%, the fastest increase seen since November 2012.
The chart below, using data from the ABS, shows the recent acceleration in term deposit growth:
“Despite super-low interest rates, investors are still keen to leave the money in the bank,” said Craig James, chief economist at Commsec.
“Term deposits were on the outer with investors at the start of the year. Now they are back in vogue, lifting to record highs and growing at the fastest annual rate in almost four years.
James believes that the growth in term deposits is simply investors spreading investments around in line with the old adage “don’t put all your eggs in one basket”.
The re-acceleration in deposit growth also reflects continued caution from consumers, along with a shift from bank’s towards attracting domestic funding sources rather than from wholesale markets.
“The lift in term deposits means that banks are being successful in attracting retail funds – funds that will enable banks to keep lending at current growth rates,” said James.
In September, respondents in the Westpac-MI Australian consumer sentiment survey consumers nominated bank deposits as the wisest form of saving right now, suggesting that investors, collectively, remained nervous.
Last week, the ASX 200 suffered its largest decline in eight months, leaving the index down 0.23% for the year.
In early August, it had been up as much as 6% for the year.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.