The Reserve Bank of Australia (RBA) announced on July 5 that interest rates are lifting a further 50 basis points to 1.35 per cent, but new data shows that the majority of Australian seniors want the rate further increased.
In a poll conducted by Starts at 60, 82 per cent of those over 60 said they want to see the interest rate raised, with one commenter saying they’d be happy if the rate hits 5 per cent.
“I can remember when I had 3 kids under 5 and interest rates hit 17% on home loans in Australia (40 years ago) and thought when I reach retirement surely I will get around 9% on my retirement funds – not to be last 7 years has averaged under 2% – just a little increase to say 5% because I have kids who have home loans,” the comment read.
Speaking with Starts at 60, Senior Financial Adviser and Podcast Host Michael Khouri said retirees should start to see returns on their savings and investments.
“For retirees, if their retirement savings are invested primarily in defensive assets like cash and fixed interest, in the medium to long term, they may see an improved rate of return on those funds,” Khouri said.
The finance specialist said retirees should monitor how well the returns on “portfolio asset allocations” are holding up against the current rate of inflation.
“A factor to keep in mind when discussing portfolio asset allocations with your financial adviser should be how the fund returns are keeping up with inflation – especially with the recent inflation rates that we have seen in Australia,” he said.
‘Financial Wizard of Oz’, Noel Whittaker, was conservative in his assessment of the rate rise, telling Starts at 60: “They [seniors] are going to get a little bit more in their term deposits, which is bugger all. If you’ve got a couple of hundred grand it’s only going to be so small.”
“I guess the long-term thing is if it gets inflation down, then the cost of living won’t keep going up.
“Inflation is a loss of purchasing power of your money and that’s one of the biggest things that affect seniors, if it works it’ll be good.”
Retirees can remain hopeful as Governor of the RBA, Philip Lowe, said Australians can expect to see the interest rates continue to rise.
“The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market,” Lowe said.
“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”