Consumers and business owners would have liked their banks to pass on more of the cash rate increase over the past year in the form of higher deposit rates, but it turns out Australian savers have done better than those in most other countries. According to the Reserve Bank, Australian deposit-taking institutions have passed on 75 per cent of the 4 percentage point increase in the cash rates since May last year. This level of pass-through is higher than the United Kingdom, at around 70 per cent; Norway, at just over 60 per cent; New Zealand, at a little over 50 per cent; the United States, at around 30 per cent; and Canada at 25 per cent. Discussing these figures in a speech at a Bloomberg conference in Sydney yesterday, RBA assistant governor Christopher Kent said: “Higher interest rates may have played a role in slowing the rate at which many households have run down the sizeable stock of additional savings accumulated during the pandemic. “This would contribute to slower growth of consumption than otherwise. In fact, the household savings ratio in Australia has only recently dipped below the pre-pandemic average after having been well above that for most of the pandemic period.” He said this “intertemporal substitution” was an important but sometimes overlooked channel for the transmission of monetary policy. “The cash-flow channel, where households pay more on their debt, is felt acutely by those with variable-rate debt. But there are other important channels of monetary policy. In particular, the rise in interest rates has increased incentives to save.  “This is true even for households that had built up a lot of extra savings during the pandemic. “Households with debt also have an incentive to save more. Some may be able to pay down their debts ahead of schedule or at least run down their savings buffers more slowly than otherwise.” Kent said the RBA’s estimate is that the 4 percentage point increase in the cash rate will have reduced overall household spending by around 0.4 to 0.8 per cent.