The Reserve Bank of Australia.
The Reserve Bank of Australia.

Good, bad, ugly: Seniors get mixed news on rates

THE Reserve Bank of Australia (RBA) has announced it will keep the cash rate on hold at 1.5 per cent for the 11th consecutive month.

Now do you want the good news, the bad news or the very bad news?

"For (seniors) who still have a house mortgage to pay, the low rates are a plus," National Seniors chief advocate Ian Henschke told Seniors News.

"For those who are already retired, it means low returns on cash investments, making it harder to make ends meet."

Henske said another issue was the government's deeming rate.

"While a couple can have investments up to $83,400 and be deemed to earn 1.75%, anything over that is deemed to earn 3.25%," he said.

"Anyone investing cash right now would find it extremely difficult to get the deeming rate of return."

And the very bad news?

Andrew Heaven from Wealth Partners said the latest announcement confirmed his prediction that the 12-month rate is unlikely to increase anytime soon.

"Holding off, waiting for this to happen, is folly," Mr Heaven said.

The RBA highlighted multiple reasons behind the decision to keep the rates on hold:

  • Conditions in the global economy are continuing to improve.
  • Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain.
  • Growth in the Chinese economy has picked up a little and is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk.
  • Commodity prices have generally risen recently, although Australia's terms of trade are still expected to decline over the period ahead.
  • Wage growth remains subdued in most countries, as does core inflation.
  • Headline inflation rates have declined recently, largely reflecting the earlier decline in oil prices. In the United States, the Federal Reserve expects to increase interest rates further and there is no longer an expectation of additional monetary easing in other major economies. 

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