The amount of money in bank term deposits has hit $213 billion - up 36 per cent in three years. An ANZ bank executive explains if it will keep paying rates this high and who is better off investing. Video / Carson Bluck
Investors are chasing the return paid on money in the bank, leading to a warning that short-term gain may make for long-term pain by missing out on equity investment returns. Madison Reidy talks to both sides, including a leader of the country’s biggest bank.
The amount of money held bybanks in term deposits has grown by 36 per cent in the past two years to $213 billion - but an adviser is warning against using deposit rates as a long-term investing strategy.
“People are eroding their purchasing power by and large by using these as a long-term investment vehicles,” Consilium head of advice Ben Brinkerhoff told Markets with Madison.
“They’re not intended for that purpose.”
A one year, fixed-term deposit was paying an average 6 per cent return in December, before tax, beating the annual inflation rate of 4.7 per cent and outperforming the New Zealand share market last year.
Just two years ago, term deposits were paying less than 1 per cent - barely a return on money in the bank.
ANZ’s head of retail banking Ben Kelleher said it wasn’t pushing customers into term deposits, rather they were choosing to lock their money away.
“We’ve seen that escalation of customers moving money, effectively from transaction accounts and from savings accounts, and chasing that higher return in term deposits.”
ANZ's head of retail banking Ben Kelleher oversees all consumer and business accounts at our biggest bank. He told Markets with Madison how much stress he's seeing in the financial system.
As the country’s biggest bank, ANZ held about one-third of all term deposits, circa $71b worth.
So, what was it doing with them?
“We use it to help give us funding certainty,” Kelleher explained.
But, the deposits were actually recorded as a liability on the bank’s balance sheet, because of the interest costs banks had to pay to depositors.
Kelleher’s role meant he oversaw all consumer and business accounts at ANZ - whether they’re saving or borrowing.
In this episode of Markets with Madison above, he reveals what’s really happening in the financial system, including if borrowers are at breaking point.
Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.
Sponsored by CMC Markets.
Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
