It was hardly a secret that thousands of retirees would be hit hard by the Reserve Bank of Australia’s (RBA) continued cash rate cuts.
Cut after cut after cut on top of dwindling returns from investments, dividend payout reductions, loss of rental income from investment properties and such have left many fully and partly self-funded retirees way out of pocket.
Even RBA boss Philip Lowe admitted the cuts would negatively affect retirees.
“The board recognises that its decisions have an uneven effect across the community. How any given Australian is affected depends very much on their own financial situation,” Mr Lowe told a Parliamentary committee early this month.
“As we have discussed at previous hearings, people who rely on interest as a significant source of income find this a difficult time.”
Well, these retirees have had enough, swamping the RBA boss with letters expressing their concerns with the cash rate staying so low for so long.
Caches of letters sent to Mr Lowe have rolled in since June 2019 and continue to be delivered in tranches.
Extracts from letters were obtained by AFR Weekend.
“I am now struggling to get 0.7 per cent, we can’t live off that,” reads one.
“Continual reductions are killing us older, vulnerable retirees who rely on this interest to live,” says another.
“I think the RBA and its governor owe self-funded retirees and Australians an explanation why [the RBA] has completely abandoned any concept of balance with interest rate policy.”
Letters flow in steadily in digital and physical form. The first lot arrived on the heels of June’s cut of 0.25 points to a then-record low of 1.25 per cent. Since then, there has been another 1.15 points in rate cuts, and $95 billion in bond purchases that have driven down bond yields and borrowing costs.
When borrowing costs fall, banks react by lowering deposit rates, meaning savers get stitched.
“My term deposit rate has shrunk from 1.5 per cent to 0.10 per cent in less than a year and every other section of the economy has received some benefit except those self-funding retirement and not on a government pension,” said one of the letters to the governor.
“Record low rates disadvantage older age people who depend on interest paid on past savings,” said another.
While the governor has all but assured Australians that negative official interest rates are unlikely, many retirees and investors are still concerned.
“Most of my assets are in term deposits, which will not be providing sufficient income and means drawing down my capital,” wrote one.
“What should I do? Are there other forms of safe investing I should investigate?” asked another.
How have the rate cuts affected your retirement? Are you concerned about the record low rates staying low for much longer?
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