Rate cut not good news for retirees
Yesterday’s decision by the Reserve Bank of Australia (RBA) to lower the cash rate to 1.75 per cent may have brought joy to many mortgage holders, but the underlying note should be of concern.
Problem one – our economy is contracting sufficiently that the RBA deems it necessary to lower the cash rate to fight deflation and stave off an economic downturn.
Problem two – ask any saver what interest rate they’re getting on their deposit and they’ll laugh in your face. So low are returns on money held in savings and term deposits that the rate of deeming applied by Centrelink is often greater. Meaning not only do savers lose out on interest but they’re also penalised by losing a high proportion of their Age Pension. A lower interest rate will do nothing to ease this problem.
Are your savings affected by the low interest rates offered by the banks? Has your Age Pension taken a hit due to higher deeming rates?