Revealed: Aussie savings accounts fall lower than inflation
A recent study from Mozo has revealed that Aussie savings are going backwards, with not a single saving account in Australia now providing an interest rate which keeps savings ahead of the current levels of inflation and tax.
The analysis revealed that an increase in the rate of inflation to 2.10% (for the year to the end of March) means that an average income earner would need to be earning at least 3.11% interest on their savings account in order to stay ahead of tax and inflation.
While this might not have been a difficult proposition a few years ago, the top savings account interest rate on the market is now just 3.05% with ME’s Online Savings Account.
“The picture for savers is becoming more and more bleak, with the nation’s savings being eaten away by tumbling interest rates and rising inflation,” said Mozo Director Kirsty Lamont.
“Since the beginning of 2017 we’ve seen base interest rates cut on seven savings accounts 0.14% on average, while ongoing bonus interest rates have been hacked on 17 accounts by 0.12%. As a result, savers would be losing money after inflation and tax eat away at their balance.”
Data from Mozo shows that the bad news has been ongoing for consumers trying to boost their savings, with the average interest rate for a savings account having dropped from 2.04% to 1.83% in the last year alone.
But the outlook isn’t totally bleak for Aussie savers, with those who are willing to part with their money for a couple of years able to take advantage of a number of term deposits with interest rates higher than the rate of inflation and tax.
For example, the best term deposit currently on the market is the Maitland Mutual Building Society’s 3 year term deposit which has an interest rate of 3.40%.
“Savers could be forgiven for thinking they might as well just stuff their cash under their mattress, but the better strategy is to move your money into a top paying savings account or term deposit so that your savings are in the best position to ride out the current trough and recover,” said Lamont.
“Term deposit account interest rates have been more volatile this year, and while rates have been cut by an average 0.20% on 287 different terms so far this year, 112 terms have seen rate rises averaging 0.24%.”
Even if you’re not prepared to make the jump to a term deposit it could still be more than worth your while to switch over to a high interest savings account that offers you the best interest rate possible.