In what was an eventful month for commentary surrounding the state of the Australian economy, the Reserve Bank of Australia (RBA) released its bi-annual Financial Stability Review. In its review, the RBA noted a supportive global economic environment for growth, however, the central bank cited elevated levels of household debt and ongoing trade tensions as key risks to both the domestic and global economies. Unsurprisingly, the RBA once again left the official overnight cash rate at 1.50%, extending the current period of relative inactivity by yet another month.
Members observed that there had been a modest increase in the banks’ year-to-date overall funding costs, reflecting the increase in money market interest rates. The cost of funding sourced from retail deposits remained very low throughout 2018 and has even declined marginally in recent months.
Figure 1. Term Deposit Spread Over Relevant BBSW: October 2018 vs September 2018
Source: RBA, BondAdviser
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