Australia's small and big banks have cut down the term deposit rates of their bank products, which could discourage consumers from hoarding cash and explore other investment options.

ANZ, National Australia Bank and Westpac have all cut down their deposit interest rates among 26 other financial institutions across the country.

A related report by the Sydney Morning Herald quoting Mozo.com.au said that since the start of last week, 29 banks have cut their term deposit rates, bringing the average two-year deposit rate down 40 basis points to 5.69 percent. Three-year deposits have dropped an average of 47 basis points to 5.77 percent on average in the same period.

The ANZ has reduced its five-year term deposit rates to 5.8 percent, down from 6.2 percent. NAB also cut down interest rates on its three-year deal taking it down to 6 percent.

The volatility in the world's financial markets may have prompted Australians to save more because of the promise of higher returns with these term deposit accounts rather than investing in shares and stocks.

Westpac has proven that term deposits had made a difference in its third-quarter performance. It said on Tuesday that profit growth had slowed down, but interest rates in these investment products have remained strong. Westpac, however, has joined the fray and cut down term deposit rates by 0.2 percent on its one-year account.