Powered by MOMENTUM MEDIA
subscribe to our newsletter sign up

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

How 3.8 million Australians lose out with the cash rate cut

Old couple

While mortgagees celebrate the Reserve Bank of Australia’s decision to lower the cash rates to a new record low, Australia’s 3.8 million retirees are set to take another hit to the back pocket. 

Following a low cash rate, the 10-year government bond yield, which is already trading at historic lows, has recently dipped below the 1.5 per cent.

With market economists expecting the rate to only continue to fall, Dom Hamson, managing director of Plato, believes that retirees’ income will continue to also suffer.

“Retirees living off cash-linked income will struggle to make ends meet. So, it is very timely for retirees to reconsider their income-generating asset mix,” said Dr Hamson.

Advertisement
Advertisement

The silver lining

As interest rates are hitting an all-time low in Australia with bonds following, dividends paid by Australian companies have never been stronger.

However, not all retirees are cashing in on this growth with traditional blue chips cutting dividends.

“Dividend increases, for example, have been largely concentrated in the resources sector, with traditional income stocks like the big four banks and Telstra either maintaining or cutting dividends,” said Dr Hamson. 

“A cut in interest rates – while it won’t lead to an increase in dividend income – will also lead to increased investor demand for dividend-paying stocks, raising the capital value of some,” said Dr Hamson.

Dr Hamson added that with over 5 million Baby Boomers moving into retirement, the need has never been greater for new and innovative retirement income.

“Active dividend income strategies should be a key part of the discussion about retirement income, given that dividend income can be four times that of term deposits,” said Dr Hamson.

How 3.8 million Australians lose out with the cash rate cut
Old couple
nestegg logo
subscribe to our newsletter sign up
FROM THE WEB
Recommended by Spike Native Network
Anonymous - It is not a bias to get a refund of over-withheld taxes. For once, Australia has a better tax system in this respect than most of the rest of the world.....
Anonymous - This is all identity politics rubbish. Inasmuch as most families are dual income earners and as most women are not in high paying jobs for a variety.......
Margaret - Happy that I won't be around in 2060....
Anonymous - This "analysis" is misconceived and should get a fail in statistics. Men pay more tax because they work more. So they should get more relief. And,.......