6th May 2015
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Is deeming rate cut on the cards?
Is deeming rate cut on the cards?

News that the Reserve Bank of Australia (RBA) has cut the cash rate to a record low of two per cent may have mortgage holders smiling, but the news is much less palatable for savers.

Those who rely on the income from term deposits and interest-bearing accounts will no doubt have received the news of the RBA rate cut with a heavy heart. With banks reducing the rate of return on savings of their own volition, the real issue is further compounded by a reduction in the cash rate.

The rate cut, which is hoped will stimulate business investment, confidence and consumer spending, may also fan already hot property markets in Melbourne and Sydney. This is not good news for those trying to buy or upgrade their property.

Term deposits currently only pay around 2.25–2.5 per cent, although in some instances you can get three per cent; these rates could drop further. And with current deeming rates at 3.25 per cent for balances over $48,000 for singles, there may soon be a greater imbalance.

Let’s hope that the next move we see is a lowering of the deeming rate by the government.

Have you seen your return on savings dwindle? Does the deeming rate accurately reflect your return?





    COMMENTS

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    Chris B T
    6th May 2015
    9:47am
    Deeming Rates shouldn't be above RBA Cash Rate at least .25% below.
    tiger
    6th May 2015
    10:51am
    According to the latest News for Seniors, Deeming rates are $48,000 Threshold, Below 1.75% Above 3.25%. I guess that will have to change.Just maybe. My term deposit is currently 3.30% on $39,000 when it matures in a few weeks time it may drop below that to about 3% or 2.96%. You just can't win no matter what you try to do.
    Bonny
    6th May 2015
    1:33pm
    Deeming rate hasn't got anything to do with the RBA cash rate. It is a rate worked out to take into account all investment returns. Some pensioners may only be earning 2% or 3% while others are earning 12% plus in the current economic environment. Deeming was bought in to make working out a return on assets a lot easier than working out what each person's investments earn. When it was first brought in it was well below the cash rate so everyone accepted it.
    Chris B T
    6th May 2015
    4:44pm
    So it is alright to have the deeming rates above RBA cash rates than.
    Since term deposits are based on this rate.
    Not Senile Yet!
    6th May 2015
    11:59am
    Deeming rates should be removed altogether.....they are a double tax on money saved after tax.....and the return is not sufficient to support or stop inflation making a cash reserve useless.
    Deeming is only a way of saving the Government a fortune when paying Pensions etc......admittedly every cent counts over the larger volume....however....deeming is inappropriate when applied to a cash reserve of someone incapable of earning an income!!!
    Golden Oldie
    6th May 2015
    12:26pm
    I agree. The purcasing power of savings is also decreased by inflation, cost of living. Assume you have savings earning 2.5%. Inflation rate of 1.5%, leaving 1% of gain. Then DSS assumes a deeming rate of 3.5%, and your earnings are now a negative of 2.5%.
    Can't eat bricks
    6th May 2015
    3:37pm
    Get your balls out of your wife's handbag Mr Abbott and increase the GST, then you collect on everything, hear that EVERYTHING!! Having said that you have to DELETE ALL OTHER TAXES including PAYG. I don't know how exactly to crunch the figures but I am sure a GST % could be worked out! Maybe 20% is not unrealistic! I don't know. If you give people more money in their pockets THEY WILL SPEND IT I AM CERTAIN OF THAT!! And stop bullshitting us we are not complete idiots. I have voted Liberal all my life, but now I am having second thoughts! You can't tax us on our money twice , three times and more. Stop talking and do something, lead by example, be a man.
    Sceptic
    6th May 2015
    4:16pm
    GST can only be changed by the States agreeing, and the Labor States plus NSW have said that they will not. So stop having a go at the PM for things that are not in his gift
    sirmikd
    7th May 2015
    8:24am
    Increasing GST IS not the answer because how much is enough ? 12% - 15% -17.5% ?
    What you would find is that if it was increased to say 12.5% there would be arguments in say 5 years to increase it to 15% and then later the same argument to increase it to ???? - In the UK GST was introduced at 10% and is now 22.5%. Much the same in Europe. Do you really want the government to take MORE money from you every time you spend ? Your wish that an GST increase is offset by cancelling other taxes is pie in the sky - it wont happen just as it didn't happen when GST was first introduced even though many taxes and stamp duties were supposed to be dropped.It didn't happen. What governments have to learn is how to spend our money wisely.
    Bobeye
    6th May 2015
    4:09pm
    Deeming is Taxation by stealth. There is always some Government Department with its fingers in your bank account, thieving money.
    Sceptic
    6th May 2015
    4:17pm
    Deeming does not take anything from you bank account.
    Anonymous
    6th May 2015
    4:45pm
    Your right Sceptic some people havn"t a clue what their on about.
    sirmikd
    7th May 2015
    8:32am
    Deemiing may not take money from your bank but it does take money from your pocket.

    Just another of the myriad little rules that are used to calculate your pension which are so complex I doubt centrelink employee could explain "in detail" how yours [pension] is made up. The computer does all the calculations.
    Fredklaus
    6th May 2015
    8:31pm
    Maybe just put your money under the bed like the last generation .don't have to worry about the deeming rate
    sirmikd
    7th May 2015
    8:34am
    Do you know with interest rates the way they are that's not a bad idea !
    Adrianus
    10th May 2015
    5:57am
    And when you forget where you hid it? What then?
    Anyway, when your gone your kids will clean up your mess and finding it, will simply reflect on what a silly old bastard you became.
    Abby
    10th May 2015
    1:53pm
    It is a good idea from the viewpoint the Government continuously change the assets test and it could be a matter of getting the pension or not and often when you need repairs done to your home it is always cheaper for cash.
    Fredklaus
    7th May 2015
    8:17am
    Beyond caring anymore,not worth the trouble running around chasing a extra few dollars
    sirmikd
    7th May 2015
    8:37am
    Beyond caring ? The old saying " Look after the cents and the dollars will look after themselves " is more important than ever !
    But I understand your feelings.
    Adrianus
    8th May 2015
    9:20am
    Can someone explain to me please, what happened to the bank deeming accounts? Banks offered an account for pensioners with interest to match the deeming rate. Are they no longer available?


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