Thematic Insight – Rate Reset: How a Year of RBA Swings Rewrote Australia’s Term Deposit Map

Twelve months ago, Australian savers expected term deposit rates to continue falling, but 2026 delivered a dramatic turnaround. A resurgence in inflation and successive RBA rate hikes transformed the market, making term deposits attractive once again. Banks began competing aggressively to attract household savings, reversing the trend seen a year earlier.

The Reserve Bank initially cut the cash rate from 3.85% to 3.60%, but rising inflation and an oil-price shock forced a policy reversal. Three consecutive 25-basis-point hikes lifted the cash rate to 4.35%, resulting in a net increase of 50 basis points over the year. This reflected the RBA’s renewed focus on containing inflationary pressures.

The impact was even more pronounced in the term deposit market. The RBA’s average one-year term deposit rate rose from 3.70% in June 2025 to 5.05% by May 2026, an increase of 1.35 percentage points. With around $320 billion held in term deposits, banks competed fiercely for savers’ funds, although the size of rate increases varied across more than 40 financial institutions.