With the RBA rate cuts, Mozo experts say “we’re heading towards a recession”
With the RBA dragging the cash rate down to an all-time low of 1.25%, Aussies can inevitably expect to see their already low returns on savings suffer even more. It’s more important now than ever to snatch up a killer term deposit or high-interest savings account to give yourself the best chance of a good return.
With no sign of the rates improving any time soon, Mozo Data Manager, Peter Marshall, said Aussies should think about putting their money away in a term deposit account for at least 12 months while they can still lock in a good rate.
“I’ve put some money into a term deposit very recently because I don’t think that the rate that I’m getting on my savings account now will exist in the near future. I think it’s going to slide,” Marshall explained.
“Even though term deposit rates aren’t great, they’re going to be the best of a bad bunch and better than just keeping them in a standard savings account.”
Despite 53 banks slashing term deposit rates in the past month, it may still be the best place for savers to stash their cash.
Peter says that term deposit rates have been cut heavily over the last couple of months in anticipation of today's announcement, so are unlikely to fall further just yet.
"The banks have already priced lower rates into their term deposits, but as the RBA may cut again in the next few months even the rates that are available now may not be around much longer."
If you’ve saved $10,000 in an average rate savings account, with the 0.25% rate cut, over 12 months you’ll only earn $130 in interest. And that’s not even taking inflation or tax into consideration!
However, with potential for another rate cut to come later in the year, it’s looking like a rocky slope from here on.
“I think it’s going to keep going down. We’re heading towards a recession. I think that if they cut once, they’ll probably cut twice,” Marshall revealed.
Cheatsheet: How to get the most out of your savings
- Become a bonus-hunter: It’s always a good idea to hunt down a savings account that offers bonus interest to help you plump up your savings. Bonus offers are often conditional, so keep your eyes peeled for any requirements like minimum monthly deposits or no withdrawals.
- Don’t get comfortable: With 94% of Aussies suffering bank-xiety, gone are the days where you’d pick a bank and become a life member. It pays to scan the market and make the switch if you find a better deal.
- Lock in a great rate now: If you have some cash that you won’t need to spend for a while, you should see if you can get a better deal with a term deposit instead. Lock in a good rate on a term deposit account now so you can maximise your savings with interest for as long as possible before rates drop anymore.
* Calculated using the average ongoing savings interest rate of 1.54%