Banking in Australia and Great Britain: A Comparison

It’s not unusual for Aussies to shadow the UK’s developments, and in many cases, to learn lessons from them.

Firstly, there was the MPs expenses scandal, which struck the UK back in 2009. This prompted a small probe by Australia’s Daily Telegraph into the practices of Canberra MPs.

But it’s only really struck notoriety in 2012, with the report into MP Craig Thomson and the revelations about credit card misuse by a number of government departments.

There’s also the case of Australian banks. Having witnessed the collapse of Northern Rock in the UK and the considerable bailout afforded to the Royal Bank of Scotland, large Australian banks have kept revenues and profits high.

There will be few who argue against the merits of strong banks, particularly given the fate of European and American counterparts. Many of these are now under investigation for alleged manipulation of the inter-bank lending rate during the inception of the global financial crisis.

But for many, it’s hard to accept the banks’ ability to pull in record profits during a global financial crisis, when many are living on the breadline and trying to negotiate their way through a stuttering economy.

Average credit card rates have risen over the past year despite the consistent fall in the central cash rate. And not only have mortgage rates failed to keep pace with these reductions in the central cash rate, but they have also been raised independently of the Reserve Bank’s movements.

If austerity has been gripping the nation, the banks have not been sharing the pain.

Bonus Rates

Some of the methods that banks have used to sustain their margins are rather furtive. With a credit card rate, after all, most consumers know what to expect, and a recent suite of new regulations should help to promote a more responsible climate for consumer credit.

Savings accounts and term deposits are often a different matter. With the interest rate cuts over the past year now beginning to impact upon term deposits, consumers are having to be all the more careful that they are not automatically rolled over onto a lower rate than before.

Deposit Rates

One further trend that has become endemic in the UK, and is now widely adopted by Australian banks, is that of temporary ‘bonus rates’, which artificially inflate the headline rate on savings accounts. These tend to last for 3 or 4 months, after which rates fall overnight to a much lower standard rate.

In the UK, the situation for savers is rather chronic. The bonus rates on savings accounts can be as high as 96%. A saver might open an account paying 3% and find that after 12 months the rate drops overnight to just 0.25%.

In this way, banks have been able to exploit savers who don’t operate with the cut-throat efficiency and opportunism that is now required to make the most of their savings.

It’s not quite that extreme in Australia just yet; but as the samples below demonstrate, bonus rates are becoming an increasingly substantial fixture. Certainly, through this system, it is evident that the big banks are not the best destination for the best rates on savings accounts.


RAMS USaver: Bonus: 5.75%. Standard [w/o conditions]: 4.95%.
Citibank Online Saver: Bonus: 5.70%. Standard: 4.00%.
RaboDirect High Interest: Bonus: 5.60%. Standard: 4.60%.

(Major Banks)
St. George Maxi Saver: Bonus: 5.30%. Standard: 3.75%.
ANZ Online Saver: Bonus: 5.25%. Standard: 3.50%.
NAB iSaver: Bonus: 5.00%. Standard: 3.50%.

Average Bonus Rate Markup: 1.38 percentage points, or 34%.

Apathy Syndrome

What has fuelled the growth of this in the UK is savers’ apathy. Half of savers, it has been revealed, have no idea about the rates they have been receiving on their savings accounts. (Read more on our UK site).

And until the recent wave of banking scandals, many Brits have been reluctant to switch banks every year to keep on top of the best rates.

Banks have been able to exploit this ignorance and apathy all too easily, meaning that the interest rates on old savings accounts are pitiful.

What Australians now have to avoid is “apathy syndrome”, notes Alex Twigg, general manager of UBank. Consumers are being put off shopping around for cheaper home loan deals, he says, even though the average homeowner could save $1,900 by doing so.

With the consistent fall in the central cash rate now making its presence felt, it’s equally important that savers become savvy to the broadening culture of bonus rates on savings accounts, to avoid the same brand of exploitation and to stay ahead of the banks’ own game.

At, we’re here to help make that happen.

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