‘I feel very sorry for the retiree’: Costello

By Grace Ormsby

October 21 2019
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The low interest rate environment is having a detrimental impact on retirees, and the government should once again look to reconsider deeming rates, Australia’s longest-serving treasurer has outlined.

Speaking at the Citi annual investment conference, former commonwealth treasurer and politician Peter Costello has expressed that he feels “very sorry for the retiree at the moment”.

“Everyone would say to you [that] a retiree should have most of their wealth in liquid assets – particularly in cash – and they get no return.”

The treasurer under John Howard from 1996 to 2007 said: “I think this is where cuts in interest rates actually have a negative effect: they have a negative effect on these people.”

He explained how “borrowers save two for every one that savers lose on a rate cut, so overall a rate cut is effective for the economy”.

But, “that’s if there’s immediate pass through and full pass through, and we’re now seeing rates are so low that you don’t get that”.

“I think for those people, they’re starting to squeal.”

Continuing, the former politician said that “deeming rates are very high and they don’t really reflect what the retirees are able to get”.

“I think [the government] have to have a look at that,” he added, acknowledging too that deeming rates have already seen a change this year.

“But, you tell me where you can get those sorts of rates anymore.”

“It’s very hard for those people,” he concluded on the topic.

For the more astute investors paying attention to the current economic climate, Mr Costello said he thinks they would be “building a little bit of safety into their portfolio in these circumstances”.

At the same event, Mr Costello also cast a critical eye over the nation’s superannuation scheme, considering the system to have “failed” Australians.

The ex-politician has previously weighed in on the ramifications of dropping the cash rate to 0.75 per cent, prior to the Reserve Bank’s announcement.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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Retirement