Rate Rises scenarios

SWF is on RBA +0.8 or +0.85%, I forget which.

Bonds markets are pricing in 2022 rises, economists expect 2023, and the RBA was claiming 2024 until just recently.

So if it happened relatively soon, then rises would likely start in 9-12 months. If slow, then likely 2 years.


4x 0.25% rate rises (possible after 2 years or a bit more, unlikely in 12 months), would effectively double SWF's interest income.

Last quarter, I put their interest income at $1.25m (or $5.5m total). Double that, and it would put them at +$100k cashflow for that quarter, even with the increased investment in staff and marketing last quarter. That would be with RBA rates at 1.0%.



It's been a while since RBA was at 5.0%, but that's a possibility.



But in that case, SWF would start passing on interest to customers. They'd likely retain about 1.0%+ and pass the rest onto clients.

So it's the move from 0.1% to 1.0% which makes a big difference to SWF (2023 onwards, likely). Above 1.0% would make more difference to clients, since most of it gets passed on.


And to pre-empt Firsova mentioning Hub24 having their interest agreement stopped -



(and in 2019)



You'd think they'd be trying to negotiate RBA+0.8% or whatever they usually get, but from another bank, but if not, then settling for RBA+0.6-0.7%.



And 9 months ago -




RBA has started to end their bond market suppression etc, so I wonder if ANZ has acted too soon. They started to rely on the 0.1% rate, so have cancelled their 2022-2023 funding, when RBA is slowing their support in late 2021.