Savings guarantee cut 'will have minimal effect'

Mozo

Tuesday 31 May 2011

Financial regulators are considering slashing the guarantee offered on savings accounts from $1 million to between $100,000 and $250,000.

Savings guarantee reduction will not hit the majority

According to the federal government's treasurer Wayne Swan, the dramatic drop in compensation for savers would only affect a small minority of Australians.

He said that the Financial Claims Scheme would still provide a total guarantee for 97 to 99 per cent of all Australian deposit accounts.

While Mr Swan has not taken the final decision to reduce compensation available to savers if their banks should fail, however, he is considering the possibility as it would bring Australia in line with other leading global economies.

The existing $1 million compensation cap is up for renewal in November of this year.

Recently, Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, claimed that Aussie households are better off than they were five years ago and have more disposable income to put into savings accounts.

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