The Reserve Bank of Australia has left interest rates on hold at 2.5% this month. This means the cash rate has been unchanged since the last reduction of 0.25% on 7 August 2013.
In the RBA’s media release following the announcement, they advised the reasons for keeping the cash rate steady include:
- – Australia’s economy is growing slower than expected, however growth in some sectors (such as housing construction) is indicated
- – There have been increases in resources exports
- – Unemployment has increased due to a lower demand for labour
- – Inflation is consistent with the 2-3% target
So, how will this affect you? While low interest rates mean your mortgage remains affordable, it can have a negative effect on your savings. Any investments held in cash or term deposits are receiving very low returns at this time. This will especially impact investors who rely on the interest earned on their funds to supplement their income.
There are options other than keeping your money in a bank account or a bank term deposit. These options allow you to keep your money accessible and in a lower risk environment, and still invest in the bank. These investments also sit within the bank, but as they are lower down the bank’s capital structure, you have the opportunity for higher returns.
If you’re interested in finding out more about how interest rates will affect you and your chosen investments, please don’t hesitate to call.
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