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.

RBA warns investors on super returns

The governor of the Reserve Bank of Australia (RBA), Glenn Stevens, has warned investors that current market conditions mean their retirement income aspirations are in danger of “not being fulfilled”.

Speaking in New York on Tuesday, Mr Stevens said that with long-term interest rates so low, members of both defined-benefit plans and accumulation arrangements are likely to be "disappointed" when it comes to their retirement incomes.

“Their retirement incomes are in danger of not being fulfilled,” Mr Stevens said.

“It is not a very daring prediction to say that these issues will loom ever larger over the years ahead,” he said.

Advertisement
Advertisement

According to Mr Stevens, while many critics “lay these problems on the door of central banks”, he said central banks are not alone responsible for the decline in long-term interest rates.

He pointed out that real interest rates have been falling since 2007. This is significant, as monetary policy is not supposed to be able to affect real interest rates on a sustained basis.

“Presumably, changes in risk appetite, subdued growth and expectations that growth will continue to be subdued have also played a role in lowering real rates,” Mr Stevens said.

Commenting on the prospects for sustained growth in the future, Mr Stevens said it is “undeniable” that monetary policy alone hasn't been able to, nor is it able to, generate the growth that markets expect.

“Policies that encourage growth through means other than just ultra-cheap borrowing costs are surely needed,” he said.

"It is surely time that policies beyond central bank actions did more in this regard. Our inability, so far, durably to lift growth prospects is arguably the biggest vulnerability the global financial system faces today. This needs to be our focus."

Mr Stevens added that going forward, central banks need to be clearer about what they can’t do.

“Monetary solutions are for monetary problems. If there are other problems in the underlying working of the economy, central banks won't be able to solve those,” he said.

 

RBA warns investors on super returns
nestegg logo
subscribe to our newsletter sign up
FROM THE WEB
Recommended by Spike Native Network
Anonymous - It means they won’t be stealing my tax refunds and cutting my retirement income by 30%....
Anonymous - Sorry ... 2 years de facto equals marriage and you can be carved up. This is Lionel Murphy’s no fault divorce where men are asset stripped and.......
Anonymous - The confiscation of Imputation Credit has been stopped, thanks to the Liberal minded Aussie voters that stand up to correct the inequality so that the.......
Cheryl k - Seems a no brainer
If you want small /medium size business to grow and employ more people vote liberal
If you want to be a self funded retiree vote.......