What the 25 basis point cut in cash rate means for savers?

17 June 2015

piggy bank in hands

The Reserve Bank of Australia has delivered a double whammy to self funded retirees and other savers this year, cutting the cash rate twice (in both February and May).

Citing declining commodity prices, below-trend growth and a possible rise in unemployment, the RBA felt, in the words of Glenn Stevens, Governor, that: “At today?s meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate. This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target.” You can read the minutes of the May Monetary Policy Meeting here.


While the news was no doubt welcome to those who have a mortgage, it?s not so welcome for self-funded retirees and others trying to earn some income from their cash savings.

So what does a 25 basis point cut mean to you?

When it comes to term deposits, the two rate cuts were passed on to savers  by many institutions, reducing the average returns that could be received across all terms.

Currently on our database, the maximum, minimum and average term deposit rates for those investing $250,000 are as follows:

























1 Year




2 Year




3 Year




4 Year




5 Year




Source: Canstar. Based on term deposits on Canstar database. Calculated for a $25,000 investment.

Despite the low averages it is nevertheless quite interesting to note the significant difference between the highest and lowest term deposit rates on CANSTAR?s database. The big message to be taken from that is: don?t let our low cash rate make you complacent! Compare the term deposit rates that are on offer here.


Overall, make sure that when your cash savings account is falling due to renewal, you do shop around to see what?s available, just in case you can find a higher rate elsewhere. If you do find a higher rate, phone your existing institution and ask if they will match it. You may be pleasantly surprised!


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