Jason Bryce, Freelance Journalist

Australia’s big four banks collectively hold $1.67 trillion of retail deposits from households. This money is used to fund their lending portfolios, mostly their mortgage books.

Banks pay zero or almost zero interest on about 20 per cent of this total, or $320 billion, says the ACCC.

This ‘free money’ has helped banks reduce their funding costs and increase their profits significantly in recent years.

Short and long-term debt was much a much larger source of funding for the banks in 2008 than in recent years. At-call deposits were about 30 per cent of the total.

Now At-call deposits is around 50 per cent of the total bank funding mix in Australia.

At-call deposits are the cheapest category of bank funding reported the RBA in their discussion paper of March 2026.

The table above shows At-call deposits costing banks just 3.24 per cent overall, compared with 4.15 per cent for term deposits and 3.76 per cent for debt.

The cost of At-call deposits is dragged down by the 20 per cent ($320 billion) returning zero or nearly zero interest to savers.

“As at end FY25, CBA held 11.7m retail transaction accounts (including Bankwest, and excluding offset accounts), which are non-interest bearing accounts.

“These accounts are designed for day-to-day access to funds for transactions such as depositing or withdrawing cash and making card purchases.” Commonwealth Bank told the House of Representatives’ Standing Committee on Economics.

“Our two bonus interest savings accounts, GoalSaver and Youthsaver:

• customers earn an ongoing base variable interest rate with no criteria;
  
• and earn a bonus rate if the balance at the end of the month is higher than
  at the start of the month (excluding interest and other bank-initiated
  transactions).“

“In the most recent quarter of FY26, over 85% of GoalSaver customer balances earnt bonus interest. Across Youthsaver, over 70% of customer balances earned bonus interest over the same period.”

The ACCC said (in 2023) that a much higher proportion of savers overall are failing to earn the top advertised interest rate on their deposits.

Canstar said on Friday that the base rates on “bonus” savers for the big four banks ranged between 0.01 per cent and 0.25 per cent. If you don’t get the bonus rate, you’re likely to get not much at all.

“In the first half of 2023, 71% of bonus interest accounts did not receive the bonus interest rate on
average each month.“

“Retail deposit products such as transaction accounts, savings accounts and term deposits play an essential role in the Australian economy, providing consumers with a safe place to store their money, pay for goods and services, and earn income through interest,” said the ACCC.

“Retail deposits are generally cheaper, more stable and more diversified than many other funding sources.

“Retail deposits can also bring additional benefits because retail depositors often become customers for loans and other products with their bank.”

Shadow Minister for Communications, Aaron Violi, described the hurdles for obtaining interest on savings as “deposit deception” at the Economics Committee hearings.

Recommendation 3 from the ACCC’s final report into the retail deposit market says:

“Banks should be required to record and report bonus rate achievement for their products

“Banks should record, for each bonus interest rate product they offer, the proportion of accounts
receiving the bonus interest rate per month. Banks should also record which bonus interest rate
criteria are met or not met for each customer.

“Banks should use this data to consider the ongoing appropriateness of their bonus interest rate
products for their customers.

“Banks should also report on the overall proportion of accounts receiving the bonus interest rate
for each product alongside their promotional material for the product.”

The ACCC says most retail deposits are held with a handful of banks.

“The largest holders of household deposits are the major banks which have around 73%, or nearly
$1 trillion, of all household deposits in aggregate.

“These providers are CBA (26.9%), Westpac (20.5%), NAB (13.8%), and ANZ (11.7%).

“The mid-tier banks together hold a further 16.5% of household deposits.

“In this report, these banks are comprised of Macquarie (4.0%), ING (3.4%), Bendigo and Adelaide (3.1%), BOQ (2.4%), Suncorp (2.4%) and HSBC (1.2%).”

Banks profit from using deposits and other funds to make loans said the ACCC.

The big banks do not face strong competition for retail deposits, said the ACCC, due to persistent high barriers to entry and expansion. of six new entrants to the market since 2018, there are none still offering At-call deposits for consumers.

Volt Bank and Xinja exited the market in 2021 and 2022.

Judo focuses on business accounts, Alex.Bank is not generally available to the public, 86 400 is now part of NAB while In1bank is no longer operating.

The average profit over 30 years from an average sized Australian mortgage ($736,000) is an incredible $228,900.

Last financial year, bank profits grew to $43 billion said The Australia Institute, $16.9 billion of which came straight from owner-occupiers with a mortgage.

This industry can afford to pay fairly for the source of their funds, much of which comes from Australians who live payday to payday.