Savings account news: Aussie interest rate to be frozen

Australia's interest rate looks set to remain at 4.75 per cent in the short term.

Consumers with a Student Accounts in Australia will be interested to learn that it looks like the national interest rate will be frozen in the immediate future.

The Reserve Bank of Australia (RBA) today (August 16th) suggested it is mulling over a move to hike the rate, which would be good news for those with cash in their savings account.

However, global uncertainty and shaky economic predictions in many countries look set to persuade policymakers to hold the rate at 4.75 per cent for now, AFP reported.

In its August 2nd minutes, which were published today, the RBA revealed it is fearful of confidence down under being dented by the "turmoil" being experienced in other nations.

The financial institution went on to note that it is likely to want to see evidence of growth in Australia's productivity market before it commits to a rate increase.

"While the central scenario of most forecasters remained for global growth to be average, or a bit above, over the next year or so, the downside risks had increased," the bank stated, adding: "A significant pick-up in productivity growth would be required to sustain real income growth around the rates seen in recent decades."

While savings account holders are likely to be supportive of an interest rate hike so that their money is working harder for them, some may be cautious of rising inflation, which is also said by the RBA to be a risk.

Australia is in a stronger financial position than many of its western counterparts, with its mining industry currently enjoying a boom period, contributing to healthy export figures.

However, much of the population is facing up to hefty mortgage payments, meaning bank officials face a difficult balancing act.

The Australian recently reported that the RBA has seemingly ruled out the idea of reducing interest rates.

Credit rating agency Moody's has sought to reassure bank account and savings account holders that Australia's major financial institutions are well protected against the kind of problems recently seen in Europe and the US.

Speaking to the Sydney Morning Herald, Moody's senior vice-president Patrick Winsbury explained that with demand for credit particularly weak in recent months, banks have not needed to borrow as much as their overseas counterparts.

"Moody's views the four majors to have a good measure of resilience in the face of renewed dislocations in financial markets, which have resulted from concerns over sovereign indebtedness," he observed.

Mr Winsbury added that the so-called big four remain broadly similar in terms of their business structure, but noted that some differences had emerged since the global economic downturn.

Earlier this month, data from the Australian Prudential Regulation Authority revealed a total of $34 million was put into Savings Accounts last year, with consumers cautious due to economic uncertainty.