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Bank term deposits provide a fixed interest rate on savings for a set duration, ensuring a stable return and often yielding higher interest compared to regular savings accounts.
While this is generally considered a low-risk investment, recent data has revealed shifting dynamics that could make term deposits not worth the trouble.
According to Vado Private, the average bank term deposit rate in June is 2.95 per cent per annum. As of January, it was 3.35 per cent.
The three-year term deposit rate was 3.05 per cent per annum, the lowest since September 2022, while the one-year term deposit rate in June 2025 was 3.7 per cent, the lowest since January 2023.
Among the majors, the 12-month term deposit rates are:
- ANZ: 3.80 per cent
- CBA: 3.80 per cent
- NAB: 3.90 per cent
- Westpac: 3.75 per cent
With rates at their lowest in years, those looking to build wealth through deposits are finding harder to stay ahead.
So much so that Vado Private’s director and head of funds management, Mark Zukerman, said the return on some term deposits is “negligible” due to inflation.
Term deposit rates tend to flow with the cash rate. During the 2022–23 interest rate hikes, term deposit rates climbed too.
Now that the Reserve Bank is cutting rates, so too are term deposit rates falling.
“We’re seeing term deposit rates go backwards, after rising sharply through 2022 and 2023 as the RBA increased the cash rate to combat inflation, peaking in late 2023 and early 2024 before easing slightly in 2025,” said Zukerman.
Zukerman is expecting term deposit rates to fall even further throughout 2025 as inflation stabilises and the RBA likely cuts rates again.
After the unexpected move to hold rates at its July monetary policy meeting, some are certain there will be a cut at the RBA’s August meeting, following the inflation data released by the Australian Bureau of Statistics on 30 July.
The outcome of the Consumer Price Index (CPI) data and the Labour Force data that will be released on 17 July will sway the central bank’s decision.
With this in mind, Zukerman said it would be prudent for cash investors to re-examine their situation to determine if it is worth the trouble.
“Cash investors are feeling the pain of the loss of their spending power. For those relying on term deposits for income on which to live or to build wealth, the drop below 3 per cent per annum for average term deposit rates means Australians’ hard-earned money is working less for them, which could put at risk their savings goals and financial independence,” he said.
“Ideally, more capital should be allocated to fixed income, a defensive investment, with an allocation to private credit a key consideration. While institutional investors have allocated to private credit, retail investors and retirees would also benefit from the regular income private credit investments provide, with yields typically around 8 per cent to 10 per cent per annum.”
[Related: ‘If they’re unsure, they hold’: Industry reacts to controversial rate decision]
