Reserve Bank governor Philip Lowe has told savers to switch to a better deal if their interest rates don't reflect the 325-basis point cumulative increase to the official cash rate since May last year.
"If Australians switch, then the banks have to respond," he told a parliamentary committee on Friday.
Banks have been quick to pass interest rates to mortgage holders in full but slow to do the same for savers, prompting an investigation by the consumer watchdog.
Dr Lowe said savers should be aiming for an ongoing interest rate of at least four per cent, which would trigger competition from banks as already seen in the cut-throat home loan market.Â
Several major banks have started bowing to pressure to up their rates for savers.
RateCity analysis shows three of the big four banks have boosted interest rates above the 25 basis point increase on key deposit accounts since the February cash rate hike.
RateCity research director Sally Tindall said consumers were missing out on generous interest payments by failing to switch.
The firm's analysis showed a saver could earn $1148 a year on $25,000 with a 4.8 per cent interest rate, compared to just $213 on the same sum at a 0.85 per cent rate.
"The big banks might have pulled their socks up this month but that still doesn't mean every one of their savings customers is now on a cracking rate," she said.
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