28th Apr 2016
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RBA tipped to cut cash rate in light of inflation drop and rising AUD

The Reserve Bank of Australia (RBA) is tipped to cut the cash rate to a record low, in response to both the latest Australian Bureau of Statistics (ABS) figures which showed a sharp decline in inflation, and the rising value of the Australian dollar.

The unexpected drop in core inflation has fuelled expectations that the RBA may cut interest rates from 2 per cent to a new low of 1.75 per cent at Tuesday’s RBA board meeting.

With consumer prices falling 0.2 per cent in the first quarter, the one-year inflation rate is predicted to drop to a record low 1.3 per cent and core inflation estimated to run at 1.7 per cent over the year – also the lowest rate on record.

It’s the first time the economy has recorded quarterly deflation since the Global Financial Crisis (GFC) in December 2008.

In response, next week the RBA is likely to follow its global peers and lower interest rates, which could spell trouble for those living off investments – especially retirees.

Another factor that may force the issue of a rate cut is the looming Federal Election. Should the RBA decide to cut the rate, it would most likely do it to coincide with the release of the Federal Budget 2016/17, to avoid adjusting rates during campaigning for the July Federal Election.

The rate cut would also be likely as a result of the rising Australian dollar from 68 cents earlier this year to around 76 cents this morning. With foreign governments doing all they can to increase their exports by keeping their own currency at an affordable rate, Australia’s rising dollar leaves us in the precarious position of our own exports being too pricey for overseas buyers, adversely affecting our balance of trade and further damaging our economy.

And although the cash rate is tipped to drop to 1.75 per cent next Tuesday, some economists are predicting further cuts by the end of the year. Su-Lin Ong, the Chief Economist and Head of Australian Research at RBC Capital Markets believes the RBA will cut the cash rate even further, to another record low of 1.5 per cent by year’s end.

Read more at www.abc.net.au
Read more at The Australian

Opinion: Low rates may ruin retirement

The news of lower interest rates will make living off retirement investments and superannuation a lot more difficult for most Australians, placing additional pressure on an already stretched retirement income system.

Retirees may have already noticed the warning signs, particularly after RBA Governor Glenn Stevens declared, earlier this month, that continuing lower rates will have a negative effect on retirement incomes, as well as making it more difficult for those saving for retirement.

Retirees living off the interest earned from investments and superannuation will feel the pinch most of all, as lower interest rates mean lower returns. This may force some to take bigger risks in order to live a more comfortable retirement, or even preserve their current standard of living.

So, how do you protect your retirement?

Many financial planners are advising that retirees do take bigger risks for higher returns, most likely through the stock market and property investment. On average, shares still offer around six per cent annual returns, which is not world-beating, but still much more than interest rate returns.

The RBA cutting the cash rate may be the right thing to do for the economy, but it certainly does not do retirees any favours. It’s one thing to advise retirees to take bigger risks with their money but, as we have learned in the past with the collapse of West Point, Storm Financial and Trio Capital, does the risk of losing everything outweigh the potential reward of short-term financial gains?

At the end of the day, for retirees, spending less means saving more. Retirees have no control over interest rates, but they do have control over what they save and spend. This may sound like common-sense advice, but what of the one-third of pensioners already living in poverty? Once again, we see further evidence that, to a great extent, the risk of retirement is placed on the individual, putting many between a rock and a hard place.

And what of those who are planning retirement? For those under 45, paying off mortgages quickly will mean they can instead put that money towards saving for retirement.

The bottom line is that, with the RBA predicting that interest rates will stay very low for the long term, most retirees will simply have to tighten their belts and refine their lifestyle in order to have enough money to live off in the long run.

Do you worry about the lower cash rate? How will it affect your retirement? Do you have any advice for others as to how they can better manage their retirement income?

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    COMMENTS

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    MICK
    28th Apr 2016
    10:15am
    Governments in the first world want citizens to not hoard cash but rather invest in assets. So they keep cutting interest rates in a race to the bottom.
    Retirees have been squeezed in Australia from both ends. First there is a deadbeat government coming after retirees wanting to squeeze every dollar out of those who are not well heeled and happy to see retirees forced into poverty. The normal mentality of a government owned by the wealthy. Second are falling retirement incomes as rates tumble. The result is that retirees will have to live off the capital, not the interest. A sure way to being hand to mouth but something the current government is working hard to achieve.
    Damned if you do. Damned if you don't. Life wasn't meant to be easy! Vote for an Independent whose preference does not go to the current government. Need to ask at the polling booth and choose appropriately!
    Bonny
    28th Apr 2016
    10:27am
    I disagree Mick it has nothing to do with the government what actions people take due to the economic conditions. Some people win and some lose in all types of economic conditions. Today the borrowers are winners and pensioners losers. If interest rate were higher the opposite would be the case.

    We now have low inflation environment so interest rates are low and could go lower. If I was to blame anyone it would be people for not spending and keeping the economy humming along nicely but I'm not going to waste my energy on the blame game. Instead I will react to these changing conditions.

    Our current economic conditions are just part of what is happening world wide and due to our minnow size who ever is in power is not going to change the world wide economic conditions.

    I know how I am going to react to these economic conditions but do you?
    Adrianus
    28th Apr 2016
    10:58am
    MICK, I cant agree with your view. There has been upward pressure on deposit rates through competition during the last few years. This was a reaction to the increased cost of wholesale funds and banks' needing to boost reserves. The depositor has been the winner during this period of banks competing with each other for deposits.
    Bonny
    28th Apr 2016
    11:07am
    Frank banks haven't been competing with each other for deposits for quite some time now but getting their funds a lot cheaper on the world wholesale markets. That's why deposits are so low as they are reflecting the price of money on the world wholesale markets.
    Idontforget
    28th Apr 2016
    12:02pm
    Mick,
    If we had a Parliament full of independents, that would be catastrophic
    MICK
    28th Apr 2016
    1:55pm
    Frank and Bonny. You only agree with the 'official' government view. Nothing view about that.
    There is no upward pressure on deposit rates. If there were interest rates would be going up. They are going down. WHilst we are not America or Europe yet we follow the trends.
    Governments are trying their best to invigorate their economies. They do not want people to hoard cash...but people are paying down debt when governments want them to spend, spend, spend. A very reliable source says that wealthy Americans have $60 cash (each) put away.
    Bonny and Frank: you either do not understand the bigger picture or your spiel is government advertising so as not to spook the masses.

    Idontforget: Your bit shows total lack of intelligence mate. Why do you think BOTH sides do not want Independents? Nothing to do with getting legislation through and everything to do with the fight to stop proper and accountable government happening. The current senate has worked as it should. Sure the bastards who claim to be our government cannot get their bad bad legislation through. As it should be. That is the whole purpose of the senate. It was never meant to be a rubber stamp as Tony Abbott kept demanding.
    You need to thank your lucky stars that the current senate is doing its job, even with people like Ricky who do not have a lot going for them OTHER THAN HONESTY, a quality missing from the current government. Some of them might not be too bright but by jingo they cars about the country.
    Yeah, I'll be giving Nick Xenophon my vote. Liberal and Labor do not deserve it and only the intellectually challenged and rusted on Party members and trolls will do the unthinkable.
    In the end we get the government we deserve. For those wanting to sell out our way of life enjoy what you are likely to end up with. And I hope your children will hound you for it.
    Adrianus
    28th Apr 2016
    2:44pm
    Bonny, when you say....."Frank banks haven't been competing with each other for deposits for quite some time now but getting their funds a lot cheaper on the world wholesale markets. " What do you mean by quite some time?
    The banks have been aggressive in the market for deposits over the past few years. The smaller banks have been weakened by this competition. No doubt about it.
    Bonny
    28th Apr 2016
    6:57pm
    Frank when banks were aggressively competing for customer's money the margin between the cash rate and what I paid for borrowed money was 1% today the margin is now closer to 3%. Obviously they must be getting money cheaper from the wholesale market for this margin to be so wide.

    Mick the senate has been operating as though it runs the government which is a far cry from it's purpose as a house of review. You need to stop blaming the LNP government and have a good look at who is really the problem.

    Also the government has no control over people hoarding cash or not. Basic economics will tell you if people feel that their future is good they will spend if they don't they will hoard cash.
    Adrianus
    28th Apr 2016
    7:07pm
    That's fine Bonny, but I was referring to deposits. You now choose to use a loan account in your example. :)
    Bonny
    28th Apr 2016
    7:31pm
    Mick I am referring to deposit rates. If the banks wanted deposits rather than just accepting them then the deposit interest rate would be a lot higher as the margin would be more narrow.

    Yes I can choose to use my loan account but at present I actually have some cash on deposit so don't need to use it.
    Adrianus
    28th Apr 2016
    7:53pm
    Sorry Bonny, I must be getting tired. I didn't understand any of that? I will come back to it when I have my second coffee in the morning. :)
    MICK
    28th Apr 2016
    9:16pm
    Frank: you are running the government's line about the senate. IT IS NOT A RUBBER STAMP and NOT obliged to do what the government of the day demands. Something Abbott was not able to get through his neanderthal skull. Nor you from what you claim.
    It is about the numbers. In the Lower House as well as the Senate. Please cry on Tony's shoulder, not mine.
    Rae
    29th Apr 2016
    7:49am
    It is the words we use Frank that confuse.

    Bonny has an account with credit in it called cash and a debt account something like a Line of credit( debt) or credit card( debt card). Not to be confused with a Debit card which actually has your credit in it.

    While we continue to refer to debt as credit it will always confuse.

    Using debt while rates are so low is perfectly sensible so long as you don't lose that capital and can pay off the debt if rates suddenly surge.

    I don't expect a surge in rates any time soon but in currency wars there can be unexpected outcomes. If short term bank bill markets seize up again then it is anyone's guess.

    I keep enough cash for 6 months in a safe deposit parcel as a back up as I've seen a bank collapse which would have frozen ATMs and credit card use except the EU Central Bank dumped near to $300 million in overnight to keep it going.
    That city is now a basket case with 7000 shops boarded up and deserted by those who could go home to the farms.
    Most of the banks are insolvent but do a great job of turning over short term money.
    Before getting too carried away with saving in term deposits check them out.
    Personally the rate borders on Australia's inflation rate and the risks have increased with the bank bail in rules signed off by the G20 in Brisbane. They are only as strong as the share market. If it crashes then the banks are also in big trouble.
    MICK
    29th Apr 2016
    8:22am
    Great post Rae. Not too sure if Frank understands what you are saying though.
    We live in unchartered waters. Predictions for the world financial system from those who understand the system (and that is not too many) is not good. Very very few people understand what the bail in rules are about and would be horrified or in disbelief if they were told that they are here in Australia sitting in APRA documents waiting for the right event to be rolled out. And you wonder why the rich are stashing their money in offshore tax havens!
    Adrianus
    29th Apr 2016
    9:05am
    Usually Rae you seem to know what you're talking about. This is not one of those times.
    I have no interest in Bonny's debit/credit accounts.
    We were discussing deposit rates. I stand by my claim that banks have been ruthless in their competitiveness over deposits on the back of concerns about the rising cost of wholesale funds and regulatory changes ie bail in etc. Until recently the depositor has been the winner. This has forced some of the smaller banks to pay more than they would have liked. I know people in senior positions in banking and others in fund management. They all tell the same story. You are welcome to disagree?
    I think your idea of 6 months cash with secure access is a good one. Things can turn in a heart beat. I don't know how anyone can expect a surge in rates in the short term. It must be comforting for our RBA to know they once again have some influence over currency movement considering the horrid years of Labor fiscal policy. I'll never forget Steven's speech in parliament directed squarely at the Labor government which just could not adapt. Those years frightened a few people.
    Rae
    29th Apr 2016
    2:48pm
    Yes Frank as far as deposit rates go we are being squeezed.

    People should consider where all the money has come from to make the financial system leaders so wealthy. Who paid very high taxes to build the infrastructure. Most of which has been sold recently by the way.

    Yes that is right. Us Frank. The Boomers who built the technology revolution and the www. Who worked hard, saved into high interest rate loans and built up the sharemarkets and bond markets.

    It is the pension funds and local council rates that has been used in many cases to prop up the markets.

    Now when our productive years are over the deposit rates are appalling.At least rates I can get anyway. I have no term deposits. Holding bonds is scary enough right now as far as I can see and I may as well hold the bond myself rather than second hand through a bank fixed deposit.

    Intergenerational theft alright but just who is doing the stealing here.

    I doubt it is any of us.

    As for our RBA having any influence I doubt it. Not in the currency wars going on right now. We have the support of the IMF and the US FED but we are paying for it I suspect. Who do you think dreams up these austerity ideas?
    KB
    28th Apr 2016
    10:25am
    The government does indeed does not want people to hoard a great deal of money not just for retirees but for other pensioners. It is hard to keep up with the cost of living when you receive a meagre increase
    MICK
    28th Apr 2016
    1:56pm
    When people spend like there is no tomorrow the economy goes ahead. People hoard when they are frightened or do not trust the future to turn out well.
    Bonny
    28th Apr 2016
    7:32pm
    You are right Mick people need to be optimistic about the future to spend and tightened their belts in times of uncertainty.
    Adrianus
    28th Apr 2016
    7:55pm
    I agree too. Our attitude changed 6 months after we sacked Howard.
    MICK
    28th Apr 2016
    9:18pm
    Thrown out for trying to bring in Work Choices...for the benefit of the rich.

    28th Apr 2016
    10:42am
    If and maybe everyone has an opinion of what will happen next week but if interest rates go down it will make it a lot harder for self funded retirees but of course it won"t effect pensioners who are well looked after (if you can keep them out of the pokies/tab/pub).

    However self funded can still put some money in shares not all and get rewarded with franked dividends and capital gain if they pick the correct shares.
    Adrianus
    28th Apr 2016
    11:07am
    Not even Wilkie and Gillard could stop Labor voters from getting to the pokies. They are magnets. I think there has been some success by confusing them with plain packaging on smokes though.
    Bonny
    28th Apr 2016
    11:11am
    Self funded retirees like me have to be flexible and move with the economic conditions.
    Anonymous
    28th Apr 2016
    11:26am
    Good one Frank.
    Your right Bonny you need to adjust with the times long as the risk is not to high.
    MICK
    28th Apr 2016
    9:20pm
    Shares prices are not guaranteed. The dividends they pay are high risk too. This is where low interest rates are pushing people but it is one of the riskiest investments at the best of times.
    Bonny
    28th Apr 2016
    9:33pm
    Term deposits are the riskiest investment over time as you will lose money after tax and inflation. Growth investments do grow long term after tax and inflation.
    MICK
    28th Apr 2016
    9:56pm
    Actually no! Shares are the riskiest!
    Adrianus
    28th Apr 2016
    10:26pm
    Risk can take on a different meaning for different investors. Some investors determine risk as level of volatility while others may see it as level of capital loss during a particular time horizon. The question of risk requires careful analysis. When those union bosses put their money in shoe boxes under a tree, I wonder if they considered the worm risk? I would not have thought worms would actually eat these notes? I have mistakenly put a few notes through the wash and they were not damaged at all.
    MICK
    29th Apr 2016
    7:39am
    Shares are well known to be the riskiest investment. Even people who stash their money into tax avoiding Tax Havens, like Malcolm Turnbull, are aware of that.
    You are clearly still unaware that we have plastic notes Frank. Amazing.
    Adrianus
    29th Apr 2016
    8:07am
    If only the AWU Workplace Reform Association had placed their faith in the riskiest of all investments then the slush fund would have grown in value substantially since the 1990s. We will never know about those worms on steroids. You can be sure Dyson Heydon didn't fall for the worm story.
    MICK
    29th Apr 2016
    8:14am
    Yeah, Dyson the Abbott plant with a brief to find gross misdoings......whilst no terms of reference to look at the workings of the current government, its funding arrangements from big business and the exchange of legislation in return for election funding.
    Do go on Frank. We need a federal ICAC to investigate ALL corruption. But of course your employer wouldn't have a bar of that!
    Anonymous
    29th Apr 2016
    9:48am
    Yes you are correct Mick but long as you don"t put all of your money into shares have some cash about whether in term deposits or various cash management funds you can still get 3.5% at ING Government guaranteed .

    With shares if they go down don"t sell until they recover I still have some that have taken years to come back but most did I only sell at a profit unless they go out backwards and in the meantime you may get some dividends.
    Also don"t be to gready if you have a nice profit sell and enjoy the gain.

    I"ll give you a tip don"t buy Slater &Gordon they are already trading insolvently and with any luck there crooked directors will go to jail.
    Adrianus
    29th Apr 2016
    10:06am
    MICK, you have a short and selective memory.
    Tony Abbott promised if elected he would get a TURC underway!
    And he did!
    We voted for it!
    And it happened!
    Gotta love it when things go to plan.

    robbo,
    Be careful when comparing P/E ratios with labour intensive organisations in the service industry. Have a good look at the underlying asset base. It's now more important than it has been.
    Anonymous
    29th Apr 2016
    10:40am
    Your right Frank I try and do a lot of research before buying or selling.
    Adrianus
    29th Apr 2016
    11:54am
    robbo when you say "With shares if they go down don"t sell until they recover" I think a good strategy especially in todays bearish market is "Dollar cost averaging."
    I realise you would know how it works but for MICK and others.
    Example:
    Say you buy shares at $10.00 and soon after they drop to $9.00.
    Instead of hanging in waiting for a bounce why not revisit your original reasons for the purchase and if they remain solid buy the same amount again.
    Effectively you have halved the downside , which means your average investment is now $9.50. This is a very good strategy for these times, but a word of caution following down will not eliminate a loss, it only reduces it. So make sure the initial investment is based on sound data.
    Anonymous
    29th Apr 2016
    2:58pm
    Yes its a good theory and I use it from time to time but as you say you need to look at why you purchased them in the first place.

    You seem like a smart fellow I will give you a share tip which I think will be a winner its called Smattrans Ltd ASX code (sma), its used for bpaying accounts in China by phone/internet etc,in a huge market.

    They are currently only about 4 cents each read up on it I think its a winner I have a lot of these myself and think they will double in value very soon.
    OnlyGenuineRainey
    29th Apr 2016
    5:50pm
    But struggling self-funded retirees who don't have enough income to be self-funded and will lose their pension soon will be forced to sell shares in a down market in order to survive. Some privileged folk here think that's perfectly fine. It won't hurt them, so it's okay.
    Anonymous
    1st May 2016
    10:48am
    I think you are the stupidest person on this blog Rainy if you are self-funded you certainly need to have money in cash and not all money in shares and who is to say even if the market is down that you haven"t made money ever heard of shorting (probably not because you are a fool).
    Adrianus
    1st May 2016
    11:16am
    robbo, what's your opinion of the banks? Do you think they have more downside? Personally I think there are at least 2 or 3 (don't want to name them) which will definitely head south. Since they have pulled back from foreign exposure I think they have been less exposed to the volatility but in my opinion that has also made them less desirable, being confined to a small Oz population? Other banks around the world aren't priced as high as our Ozzie banks when you consider funds under management and their comparative enormous customer base.
    I'll have a look at your sma, would like to add some information technology.
    Anonymous
    2nd May 2016
    8:07am
    Good Morning Frank I am a bit each way with the banks at the moment I don"t really think they will go down much more but with shares you never Know . They do pay a good dividend and I think that should remain the same.

    I do have some bank shares that are losing at the moment but I don"t worry to much as to me they are as solid as you can get, it always a wait and see game but go with your gut feeling I don"t think you will lose.
    Adrianus
    2nd May 2016
    9:38am
    I agree, it's the high dividend yield which is acting like a balloon to stop the banks dropping. We have seen what happens when the blue chips quarantine dividends.
    During those chaotic Keating years BHP discontinued dividends while they adjusted to changing customer needs in readiness for a boom. The market reacted and their price dropped 50%. This time they have used debt to pay dividends, which has helped to cushion the landing caused by the end of the resources boom. I think there may have been a large number of call options out there on this one at anything under $15 because it bounced back very quickly.
    I think the banks may find themselves in a similar quandary following the RBA decision tomorrow? A tough time for our banks with downward pressure on fees and interest rates.
    I don't know if I should get in now and follow down if necessary or wait a little longer?
    Anonymous
    2nd May 2016
    11:30am
    Whose to say Frank but I can tell you the bank shares are getting hammered today.
    Anonymous
    2nd May 2016
    11:30am
    Whose to say Frank but I can tell you the bank shares are getting hammered today.
    Adrianus
    2nd May 2016
    1:51pm
    It's a big day tomorrow robbo, so that could be a response to something in the budget rather than the anticipated RBA decision? I still think they are around 15% overpriced. Yes, who's to know? But the market has reacted to something. The AORD is only down .5% but the banks are being singled out as you say? I would imagine the majority of retirees own bank shares. They became quite popular when Rudd scared us by upping the bank guarantee, so I think that has contributed to their inflated price?
    Adrianus
    28th Apr 2016
    10:45am
    If the RBA were to drop the cash rate, sure it would put pressure on the banks to review their lending rates, as they constantly do anyway, but it does not necessarily follow that lending rates will drop. Even holders of commercial bills should not expect a drop. The Aussie dollar was hammered on the back of the low CPI figure. Just shows how sensitive the markets have become. Then again, occasional volatility is to be expected from a currency which is traded as often as the Aussie.
    Rae
    28th Apr 2016
    3:18pm
    Frank have you missed the currency wars. They have been raging for almost a decade now.

    Why do people always expect tomorrow to be like yesterday?

    We are also in a resource war and losing otherwise China wouldn't own our farms, mines, ports and electrical providers.

    Interest rates could go negative here as well. The best we can do is to be very frugal and question every price rise as there should not be any in a deflationary environment with stagnating labour costs.

    For example the 8% rise on health insurance was very stupid and shows that the LNP have little control otherwise Ley would hae said no.
    Adrianus
    28th Apr 2016
    3:53pm
    Thanks Rae, I'm pleased to know that I have missed a war. People generally like to be positive except when they are having a bad run. I called a business owner yesterday and asked "how are you going?"
    She replied "I'm having a bad $#@%&^* Day."
    I said "are you sure it's not just a bad 5 minutes?"
    Her response was "yes it's a bad 5 minutes but its happening 12 times every hour!"
    The big war we are losing is the productivity war. We will not get out of bed unless we get paid 5 times that of our Chinese peers and we don't want to work hard for it.
    I agree there should be no rises atm and that includes public service.
    MICK
    29th Apr 2016
    8:29am
    Frank: if your LNP had its way Australians would be earning a cup full of rice (not the rich though!).
    We do have apathy but both sides of politics could fix it tomorrow with a bipartisan change to our social security system with a conscience vote for sound changes. I find it appalling that one third of our taxes go to social security. There needs to be some accountability from those who abuse the system but both sides of politics refuse to face the electoral backlash so keep doling out money and kicking the rather large can down the road.
    Adrianus
    29th Apr 2016
    9:18am
    That is precisely our problem MICK. Pleased to see you can have sound logic for a change. We have reached a critical point in the electoral numbers where most of the voters are receiving welfare. One side wants to do something about it and is but any wholesale changes will mean political harikari. The other side see it as a political opportunity.
    Rae
    29th Apr 2016
    3:03pm
    Well there has been a whole heap of productivity rise since 1970 that I can see in the graphs Frank. Pity the worker's have not had such a fair share of it. All that money made through the productivity increases has been squandered on high living.

    Having kept tightening that belt through booms and busts for decades just maybe workers are over it Frank and that might be why they are not so keen to work their butts off so someone else can live the dream.

    I'm absolutely disgusted at the greed and incompetence of governments and big business right now.

    And yes I agree that the welfare issue needs a very big fix. We can't afford the largess going on. Starting with welfare for those who can afford to look after themselves it should be dealt with.
    Paying couples on over a hundred thousand dollars childcare rebates is one of my pet peeves as I managed to pay for my own kids on far less than that and with a single income.
    FM
    28th Apr 2016
    11:51am
    Hi Mick
    Had you read Mark Kenny's report in the smh before you posted your comment. I am certainly in favour of rigorous discussion but what has been presented there by Life Choices in not a reflection of rigorous discussion it puts one point of view that 'baby boomers are in favour of including the family home in the assets test’. It does what you object to it gives politicians something to quote to push an agenda such as including the family home. This survey required much more rigorous analysis if it were to have validity. It is unlikely that people who are at risk of losing the pension if the value of their homes were included in the assets test voted to have the family home included unless confused by the push polling methods used in the survey. Rather it would seem that some of those who are self sufficient would have no concern about seeing other people lose their homes or the pension. Even more sadly some people who get a pension feel that others should not if they have a home worth more than their own. Discussion on this site is fine but it should not be distorted to represent one view and used to push a political agenda.
    MICK
    28th Apr 2016
    2:09pm
    The rigorous discussion FM is how readers respond. If it is crap that will come out and readers will shred the story if applicable. And by the way, do not believe everything you see on TV or read in the media.
    Maybe I am wrong but my take was that boomers agreed to the family home being included AFTER A CERTAIN THRESHOLD. I concur with that view as long as the threshold is not arbitrarily low to suck in the middle class which does not have a large retirement investment to draw on like the rich all do.
    For the record we are self sufficient but not too far above the pension. Market forces could pull the rug out at any time and our house is a seaside environ house in Sydney. As I said, put a fair threshold in place and I would agree even though it may be contrary to my interests.
    Adrianus
    28th Apr 2016
    5:35pm
    "For the record we are self sufficient but not too far above the pension. Market forces could pull the rug out at any time and our house is a seaside environ house in Sydney. As I said, put a fair threshold in place and I would agree even though it may be contrary to my interests." - MICK.

    MICK, I'm scratching my head here!
    A plumber on $100k pa is rich, and yet you are not???
    OnlyGenuineRainey
    28th Apr 2016
    8:32pm
    FM, I suspect many respondents considered the question of equity rather than personal interest. From an objectives standpoint, exclusion of the family home is grossly inequitable and detrimental to the economy. People benefit from plunging huge amounts of money into the family home, distorting the real estate market (to the detriment of younger buyers) and positioning themselves to claim a pension even though they are much richer than others who can get no pension because they accepted modest accommodation and invested in assets they THOUGHT would return an income that would enable them to be at least substantially self-sufficient. Now they are being totally screwed over by a dishonest and unfair government, while rich home-owners are laughing.

    The family home SHOULD be included in the assets test, but the assets threshold should be raised very much higher, to allow for retirees to own a decent home AND have reasonable assets before losing badly needed pension benefits. Ideally, the assets test should be scrapped and an income//deemed income test applied (with the value of the family home included in deemed assets, but with a high threshold before deeming applies).
    MICK
    28th Apr 2016
    9:25pm
    I never said anybody on $100k was rich. Where did you dream that one up Frank?
    Rich is about high income and considerable assets. Net worth is the right expression.
    So what is your net worth Frank? Come on, you are amongst friends.........tell the truth..........if you are capable of that. And let's be upfront.....you are on a politician's retirement scheme, yes? The old one? Which prints money for ex MP's?
    mangomick
    28th Apr 2016
    12:08pm
    It doesn't matter how low interest rates go people will not start spending or risking their hard earned money until they have confidence in their elected Governments.Look at the Debt of the top 20 countries in the world, Look at countries like Venezuela's with inflation running at 500% and the USA running with a $19.3 trillion debt, Brazil a major resource country, a basket case and our own deficit . it's no wonder many would rather just try and maintain most of their capital by leaving it in the bank rather than put it in Equities. Equities whose prices are inflated just because Interest rates are being kept artificially low by the Federal reserves.When Governments start talking about so called "helicopter money" i.e printing money to give out ,just to try to get people to spend it to create demand then things aren't as rosy as the Governments of the World would try to have you believe.
    Fliss
    28th Apr 2016
    12:15pm
    Well said mangomick!! Spot on!
    MICK
    28th Apr 2016
    2:09pm
    Agreed. That pretty well hits the nail on the head mango. With the other eye on the economy.
    Adrianus
    28th Apr 2016
    2:22pm
    So mango are you suggesting that we leave our money in the bank and don't spend it, then vote for Labor? Cash for clunkers, set top boxes, pink batts, solar rebates, money for new TVs? You do realise we had to pay extra taxes to cover the cost of all that?
    I would rather see more disposable income in the hands of those who pay taxes. Why tax a worker then give him some free pink batts? Wayne Swan got that idea from the G20 meetings. It was to benefit other economies at Australia's expense.
    MICK
    28th Apr 2016
    2:52pm
    And do you realise Frank the government crank that our debt has close to doubled since the Party who employs you came to office? Do you also realise that we will not even be able to afford a new TV under the current government which is implementing its Work Choices under another label?
    If governments from both sides did not sell our jobs we would have full employment and be earning export dollars.
    How about you go after Turnbull for looking the other way on multinational tax evasion, including the rich, and tax havens.....which he uses as well. We do not need more of your government funded BS. It does not help the nation. Only the rich!
    Adrianus
    28th Apr 2016
    2:57pm
    MICK the only two who had the political will and courage to do something about that were hounded out of office before finishing the job.
    MICK
    28th Apr 2016
    4:12pm
    Abbott and Hockey? Are you serious? You must be a nutcase mate. Surely you are not still on the payroll of these two:

    Abbott - liar of the century. Backflipped on most of his promises, removed the debt ceiling so that his government could run up debts forever and then doubled the debt.

    Hockey: "we have a budget emergency". Apparently we don't any more. Straight from the current monkeys. So thAt must have been a lie as well.

    The only things the above two wanted was to rout working Australians, turn the nation into another America where average citizens are dirt poor and give huge tax cuts to the rich. The same game is still on.

    Go crawl back under your rock Frank. Your 'view' is rather despicable and one that nobody who honestly examined the facts come come to.
    mangomick
    28th Apr 2016
    8:03pm
    Frank .What I am saying is that unless Governments and the markets can instil some confidence in the system then it doesn't matter how low the Fed lowers interest rates many people are not going to risk their capital by buying over inflated equities or squander their money on goods they can do without until they can see some sanity return to the monetary system. The markets are being artificially propped up by low interest rates and you can now see what happens when a Government (Japan) refuses to further artificially stimulate the economy. (market down 3.6 %. A capitalist system only works when true market forces and not artificially manipulated forces are allowed to play out. Swans "helicopter money" didn't work and yet now we have Mario Draghi is muting the same Milton Friedman's idea as a plan of last resort.
    Adrianus
    28th Apr 2016
    9:04pm
    mango I think you are right about the lack of confidence people have being the issue. Glenn Stevens has been saying that for some time now and my interpretation is that he has used it as a reason for the RBA's reluctance to tighten monetary policy.
    I agree with that, but then you go on to say that the low interest rates are artificially propping up markets? It's either working or it's not?
    The ASX is now dominated by players looking for short term gains. This can happen with a bear market. As opposed to a bull market when stayers dominate. I don't mind the RBA and Government giving the economy a gentle nudge with monetary and fiscal policies but like you I would prefer a free market.
    MICK
    28th Apr 2016
    9:30pm
    And that mango is where the real worry is coming back to bite Central Banks around the planet.
    Debt will never disappear unless a new boom is created and that ain't happening from what I can see. You are correct that people are hoarding their money at present.
    For what it is worth Central Banks and their governors is the reason why the mess could not self heal after the GFC. Bad businesses like the too big to fail banks should have been let fail. They were'nt.
    mangomick
    28th Apr 2016
    10:03pm
    Just because markets are propped up artificially by trying to force public money into riskier investments Frank doesn't mean the low interest rates are working . They are not supporting a vibrant economy. People aren't buying the goods that many of these companies make.You only have to look at Company profits this reporting season to realise that many companies aren't making anywhere near the profits that they should be to support their current price. The share market is slowly being turned in to a giant ponzi scheme and when the music stops I personally don't want to be the last man standing.
    MacGyver
    28th Apr 2016
    12:13pm
    I totally agree with your comments Mick. I have finally made it to retirement age but once again I feel like I am being screwed.I guess there are a lot of baby boomers who may feel the same. In my late twenties I had saved enough money to put down a deposit on a house and then in 1980 mortgage interest rates jumped into double digits 10.25%. and from then on mortgage Interest rates kept climbing and climbing so by 1990 they got to 17.00%. At present mortgage rates are at a historically low rate of 3.69% and if a house was purchased 6 or 7 years ago with the first home owners grant and the new home buyers grant a total of $24,000 was available from the government. So this is why I feel like I was screwed back then and now that I have finally paid off my home and looking forward to a semi-comfortable retirement the RBA is set to cut the cash rate once again. With very little interest being generated I have no choice but to dig into my capital just to survive. One thing for sure is the cost of living will keep increasing and only time will tell what interest rates will do. I know I shouldn't complain because there are a lot of people and pensioners doing it a lot harder then myself but I would love to have a least one win. MacGyver
    MICK
    28th Apr 2016
    2:13pm
    Been there, done that. You must be in same age bracket. We copped the 17.25% rate with an increase in rate letter every month. Painful. GenYs have no idea of what boomers did to get to retirement.
    It is a wonderful time to pay off debt if you have permanent work. The government hates that! So in the future people will look back and their children will demonise them as having "had all the opportunities". Sound familiar?
    johnp
    28th Apr 2016
    12:29pm
    So many comments seem to be focused solely on blaming the government of the day for everything. Australia is a tiny fish in a big ocean, and whatever government is in power can have little effect on global markets. For sure, lower interest rates is hard on retirees. I am one of those who paid 17% on my mortgage in the late '80s/early 90's. Now I am facing record low rates on my small amount of superannuation. Life isn't easy, but I don't blame the government for that, and I don't care which side of the political fence it sits on. I still live in the most fantastic country in the world, and I'll make whatever adjustments are necessary so that I can keep on living in this country.
    mangomick
    28th Apr 2016
    2:04pm
    I think everyone does have a right to blame their respective governments for the state of our economy. Obviously not just the current Government of the day but all previous short sighted Governments who have been more concerned with holding onto power than putting in place bi-partisan plans to ensure the wealth(not just monetary wealth) of this nation. They are the ones who set in place legislation that dictates how a country is run. They decide how much in Royalties they will receive for selling the Countries mineral wealth and they dictate monetary Policy to the Reserve bank and put in place superannuation schemes etc. They are the ones who control the fiscal outcomes of the country through managing the Nations wealth and they are the ones who squandered the pension funds that were put in a separate account by earlier Governments and then hijacked into Consolidated revenue.Yes we have a great Country but we shouldn't be blinded by the fact that our sovereign wealth has and is still being squandered by poor government policy and decisions.
    MICK
    28th Apr 2016
    2:16pm
    Very true John....but our governments (both sides) are intent on wasting what the rest of us work so hard to produce. I think that government need more heat so that they get rid of the "mandate" BS the current one uses to justify doing terrible things to the working class. On the other side it is long overdue that the welfare mentality is curtailed. One third of taxes paid in Australia goes to welfare and that is a drunk having a scotch to help him get over a hangover.
    OnlyGenuineRainey
    29th Apr 2016
    6:06pm
    I certainly blame the government when they make stupid decisions that will clearly have a negative impact on the economy and society. I blame the government for allowing health insurance to become so costly that half the population can't afford it and need public health. I blame the government for allowing education to become an unaffordable luxury. I certainly blame the government for driving up debt by offering retirees 7.8%+ interest for REDUCING their assets, and creating massive disincentives for younger Australians to save, and then lying to claim their stupid cruel change to pensions will save money. (Clearly it can't! It will drive costs up!)

    I blame the government (a past government) for stealing the fund that was set up to ensure we could afford to pay adequate pensions. I blame the current government for the stupid notion that grinding pensioners into poverty and stripping better-off retirees of their spending power will help the economy, when what we really need is consumption to drive job creation, profit growth, and higher tax revenue.

    I blame the government for a STUPID and economically destructive superannuation tax system, for not collecting fair tax from rich multi-national corporations, for allowing off-shore deposits, for endorsing tax minimization schemes, and for creating a tax system that allows the rich to escape fair obligations to support a healthy society.

    Yes, I blame the government for gross mismanagement - mostly focused on vote winning and overindulging themselves and their rich mates. We don't need to be in this mess. Inept governments created it.
    BrianP
    28th Apr 2016
    12:44pm
    It would be good to budget better if we had anything to budget with.
    MICK
    28th Apr 2016
    2:19pm
    And if government did not spend like there is tomorrow and squander the public purse then we would have plenty in the coffers. It's basic housekeeping.
    But fear not Brian....both sides are selling are best farming land to THE CHINESE GOVERNMENT to get some quick cash. That'll work out real good when Australia reaches a population of 100 million and our food growing land is producing crops for China. Funny how this issue rarely makes the media............
    Scrivener
    28th Apr 2016
    2:48pm
    They are trying to kill us all off while trying to get mandatory Euthanasia one week after you retire and stop being an economic unit past the far right of the Coalition and voters.
    MICK
    28th Apr 2016
    2:55pm
    A retirement age of 70 and a stressful job lead to drop dea syndrome Scrivener...euthanasia not required. All other average workers: use euthanasia laws one week later.
    bob
    28th Apr 2016
    3:28pm
    with all the comments on low interest rates think of the ex-servicemen and women.Once the government used to give them a pension where they could live modestly in comfort .But since 1989 their pension increase has been linked to the CPI,not much left after food
    FM
    28th Apr 2016
    4:30pm
    Mick it would be naive to believe that rigorous discussion of newspaper reports is published by newspapers. The majority of people do in fact take newspaper articles at face value especially if they have not given a matter much thought, they are extremely influential.
    It is disappointing to see this site used to erode security for the elderly. As we know a system was put in place seventy years ago (1946) to ensure that everyone got a contributory pension similar to that provided in the US, UK, Canada, Europe, NZ. Everyone now retired has contributed to this. Many older workers have had to rely on it.
    The spirit shown by many contributors here is in stark contrast to the spirit in which this scheme was set up by the Curtin/Chifley Governments with the bi-partisan support of the Menzies Opposition. Menzies is quoted as saying that the Compulsory Contribution (7.5% levy) should be kept separate so that “the stigma of charity should be removed from the Age Pension.” “It should be an entitlement earned by the person’s personal contribution to the fund.” They did not envisage people losing their homes to receive it.
    As I am sure you know money was ‘borrowed’ from this fund by the Fraser and Hawke Governments with the Hawke Government saying they would work out what to do about pensions when the time came. The solution present governments have found is to pretend this fund never existed. We should not accept this as satisfactory.
    If other countries can organize and provide contributory pensions without threatening people’s homes surely Australia can.
    Australia would appear to be the wealthiest country in the world if judged by its ability to pay political and executive salaries but the poorest if judged by willingness to provide an aged pension.
    MICK
    28th Apr 2016
    5:22pm
    Newspapers are highly controlled. TV is highly controlled. This website allows VIEWS to be discussed rather than being censored. That is the difference!
    Big business and the rich end of town control and/or own media and do not welcome opinion which is contrary to what the official line is: ie., propaganda designed to control the public and ensure that the wealthy remain wealthy.
    It's a real game.

    28th Apr 2016
    5:25pm
    The RBA's repression (ever low/lower level) of interest rates is designed to punish savers and reward borrowers. Borrowers increase the proverbial growth everyone is seeking by buying useful and useless 'stuff' to keep the economy ticking over, so they tell us.

    To get around it, we just shut down our spending harder every time they decrease interest rates so we can keep as much of our capital intact as we can. Discretionary spending on any 'niceties' are always the first to go - pay your self first becomes the number one priority.

    It is surprising how frugally, yet comfortably, you can live if you put your mind to it - and you can either complain about the available returns, or turn frugality into a sport.

    And frugality is a sport that scares the hell out of the RBA if too many do it - but they know the majority won't do it to save themselves.
    OnlyGenuineRainey
    28th Apr 2016
    8:33pm
    Yet we are told high household debt is a problem for Australia and we need to reduce it. 'That's hardly consistent with the idea that borrowers should be rewarded and savers punished?
    MICK
    28th Apr 2016
    9:02pm
    That is a conundrum Reasons.
    High interest rates = high inflation = fast rising prices. Ask any of us on this forum about 17% interest rates.
    Really low interest rates (normally in times of economic worry) = people paying down debt and people putting off spending...which makes economic conditions worse again. A negative loop methinks.
    Who said life was easy?
    MD
    29th Apr 2016
    8:41am
    Worth having a look at -www.australiandebtclock.com.au.

    The site probably only has significance to the 'boomers' generation, (and in all probability would only be visited by same).
    Although I don't wish hardship on later generations; even if they were to acknowledge a 'time bomb' is ticking ominously, I seriously doubt any change in attitudes would result however, it does underscore your respective point(s).

    Most, including Govt's seem to be spending without due care or consideration for the future, all this on mostly borrowed $ - CREDIT. Maybe we should board the same gravy train, charge everything including euthanasia and burial costs to a credit card and thereby see out our days in blissful ignorance.
    Adrianus
    29th Apr 2016
    9:21am
    Yes MD, you know you've planned well when your last cheque bounces.
    FM
    28th Apr 2016
    7:16pm
    Yes Mick I agree. I was disappointed that the operators of this website presented our discussion as if we have reached some sort of consensus. As we know, you and I and others are likely to hold quite different views to Bonny, Frank and your avatars on most issues. Some editors of this site appear to hold views similar to Bonny's when they are expressed. They do not seem to appreciate in any way the fear the suggested changes are causing for those who are at the older end of the spectrum who no longer have significant savings or any means of supplementing their incomes. They seem far removed from the struggles of retirees which leaves me wondering why they actually operate this website.
    MICK
    28th Apr 2016
    9:07pm
    I am more thinking that some of the reporters for the site are not old enough to understand being squeezed from all sides. The thing I find strange is that THEY will at some time inherit a part of or all of the family home. Do they really want their parents to 'spend the kids' inheritance'? That would be strange.
    I would love to leave my children something other than a 'been nice to know you' card. Everyone deserve a leg up in life and no low life right wing government wanting to feed the big end of town should ever be allowed to steal it.
    OnlyGenuineRainey
    29th Apr 2016
    5:54pm
    It amazes me that so many of the X and Y generation are so focused on their ''here and now'' selfishness that they can't see that they are destroying their own retirement by supporting attacks on retirees. Firstly, they miss out on inheritance, but more importantly, if it was okay to strip our generation of a dignified retirement, it's surely going to be much more okay to attack retirees in future generations? If I were young, I'd be screaming blue murder over attacks on retirees and demanding a better deal for our oldies! It passes down!
    OnlyGenuineRainey
    28th Apr 2016
    8:23pm
    ''And what of those who are planning retirement? For those under 45, paying off mortgages quickly will mean they can instead put that money towards saving for retirement.''

    But the Government has decided to punish harshly those who save (unless they become very well-to-do) and reward those who DO NOT SAVE with a 7.8% return indexed to inflation for every extra $1000 they spend. How is anyone going to be better placed to fund their retirement when governments devise such STUPID AND DESTRUCTIVE POLICIES?
    MICK
    28th Apr 2016
    9:12pm
    Been there, done that!
    I built my current house age early 50s. At that time I had paid out the mortgage and bought a wonderful block of dirt.
    What you go on to say is spot on. Guess who is after all that you have worked for? Yep. The rich man's government with the big end of town not wanting to pay taxes, have offshore tax shelters, reduce wages for workers and get the public to fund needs rather than using taxpayer money. THAT IS WHAT IS ON THE TABLE.
    So who you going to vote for? Sorry Rainey, I already know the answer to that question. Just there for the dunderheads who still believe that the current government is other than an arm of the rich.
    Chris B T
    29th Apr 2016
    9:04am
    How is cutting the cash rate .25% good for the economy when previous cutting had no real effect, except increase property prices.
    Loans are at all time low interest rates, seems to be heading for a Perfect Storm.
    When the change comes as sure as night and day the bleeding hearts will comeout with the sky is falling.
    Allenmack
    29th Apr 2016
    11:20am
    The sad fact is that the RBA and all central bankers really don't know what they're doing, they are fiddling with the hope that somehow it will all start to work out, and it probably will eventually after they have extracted the last dollar out of evey cash account that exists. A marvelous analogy I heard is "when the only tool you have is a hammer, it's amazing how many things need to be nailed".
    Deb
    29th Apr 2016
    1:51pm
    Mick your comments are spot on. Absolutely spot on.
    Glen48
    30th Apr 2016
    6:17pm
    look at the Aus.Liberty Alliance for info, We are on the way to Neg rates,


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