Falling interest rates to hit ‘self-funded retirees’

Yesterday, the Reserve Bank announced its decision to cut the official cash rate for first time in 18 months, down by 25 basis points to 2.25 per cent.

Commenting on the decision, National Seniors chief executive Michael O’Neill said seniors living off “simple investments” will be the hardest hit by the decision.

“Seniors aged over 65 own 45.3 per cent of bank and financial institution term deposits and most of them are on low, fixed incomes,’’ Mr O’Neill said.

“Today’s cut simply means less money in the pockets of many, many retirees around Australia.

“What’s probably most concerning is that the cash rate is now more than a percentage point lower than the highest deeming rate (3.5 per cent) and is close to the lower deeming rate (2.0 per cent), making it more difficult to earn decent returns.”

However, Mr Hockey issued a statement welcoming the move as “good news for families, small business, the economy and jobs."

“This is the first interest rate cut in 18 months and will put an extra $750 a year into the pockets of a typical Australian family with a mortgage of $300,000,” the statement said.

“The cut comes on top of recent falls in the price of petrol – saving the typical Australian family around $80 per month compared with the middle of last year.”

The treasurer urged banks to pass on the cuts to consumers.