The high Australian dollar is making life tough for people with savings deposits.
In a failed attempt to bring the dollar down with low cash rates, the RBA is coming under increasing pressure for its stance on record low interest rates.
Savers, in particular those near retirement age, are copping a rough deal as banks continue to keep term deposit rates low, and its forcing them to cut their spending and keep working longer before retirement.
Last week the European Central Bank took steps to stimulate it’s economy through monetary policy and it will put downward pressure on the euro which will in turn add to the strength of the Aussie dollar.
James Purvis from the madison Financial Group’s investment committee told The Financial Review retirees usually look for a return on savings of between 4 and 7 per cent.
“Recent declines in deposit rates towards the inflation rate are creating enormous difficulties for savers,” he said.
“The concern is retirees start taking on too much capital risk in the elusive search for yield.”
The International Monetary Fund this week has given further warnings to central banks to be careful with low interest rates that may cause housing bubbles as banks fight for their share of the mortgage market.